CIS Scheme for Roofers: What You Need to Know

The Construction Industry Scheme (CIS) is HMRC's tax collection mechanism for the construction industry. Under CIS, contractors who pay subcontractors for construction work must deduct a percentage from payments and send that money directly to HMRC. The deduction goes towards the subcontractor's income tax and National Insurance liability.

Roofing is explicitly included in CIS. HMRC defines construction operations broadly — and roofing is specifically listed as a construction operation covered by the scheme. This means:

• Any roofer working as a subcontractor under a main contractor (a building firm, a larger roofing company, a developer, or a local authority) will have CIS deductions made from their payments
• Any roofing company that pays subcontractors must register as a CIS contractor and make deductions
• Direct work for a homeowner (where the homeowner is not in the construction business) is generally outside CIS

The practical effect for most self-employed roofers is that a significant proportion of their income arrives net of deduction — the gross amount they invoice is not what arrives in the bank. Understanding this is essential for managing personal cash flow and avoiding nasty surprises at Self Assessment time.

Under CIS, your role depends on the specific job and who you are working for:

You are a subcontractor when:

• You are hired by a main contractor or a larger construction business to carry out roofing work
• The person engaging you has overall responsibility for the contract or is themselves a contractor under another party
• You are paid labour-only, or supply both labour and materials, for roofing operations

You are a contractor when:

• You engage and pay other self-employed roofers or tradespeople to carry out work
• You have taken on a contract and subcontract parts of it to others
• Your annual spend on subcontract construction labour exceeds £1 million (mainstream contractors) or you engage subcontractors at all if you are already in the industry

Many roofing businesses are both simultaneously — they are a subcontractor to the developer on one job while hiring their own gang of subbies on another. Both sets of obligations apply at the same time.

If you are a contractor, you must register with HMRC as a CIS contractor before making payments to subcontractors. Failure to register and make deductions correctly results in penalties and HMRC pursuing the contractor for the amounts that should have been deducted.

CIS deductions are made from the labour element of a subcontractor's payment — not the materials element. If your invoice includes both labour and materials, only the labour portion is subject to CIS deduction. This is why accurate invoicing that separates labour and materials is important under CIS.

The three deduction rates:

• 0% (Gross payment status): No deduction is made. You receive your full invoiced amount. Gross payment status is awarded by HMRC to businesses with a good compliance record — they must have filed all returns and paid all tax on time for the previous three years, have a UK bank account, and pass a turnover test (minimum £30,000 net CIS turnover for a sole trader)
• 20% (Registered subcontractor): The standard deduction rate for subcontractors who are registered with HMRC for CIS. The contractor deducts 20% of the labour element and pays it to HMRC on the subcontractor's behalf
• 30% (Unverified subcontractor): The highest deduction rate, applied when the contractor cannot verify the subcontractor's status with HMRC — typically because the subcontractor has not registered for CIS, or their National Insurance number or UTR (Unique Taxpayer Reference) does not match HMRC records

The 30% rate is a significant cash flow penalty. For a roofer earning £3,000 in a month, the difference between 20% and 30% deduction is £300 per month — £3,600 per year — arriving in their bank account versus sitting with HMRC until the next Self Assessment reclaim. Register for CIS with HMRC before starting any subcontract work to avoid the 30% rate.

If you engage subcontractors on any of your jobs, you have CIS contractor obligations regardless of how small the sums involved are.

Verifying subcontractors: Before making any payment to a new subcontractor, you must verify them with HMRC through the CIS online service (or by phone if you do not use online services). Verification tells you which deduction rate to apply — gross (0%), standard (20%), or higher (30%). You must record the verification reference number.

Monthly returns: By the 19th of every month, you must submit a CIS return to HMRC showing all payments made to subcontractors in the previous tax month (6th of one month to 5th of the next). The return must include:

• The subcontractor's name, UTR, and National Insurance number
• The gross payment amount
• The materials cost (excluded from deduction)
• The deduction amount

You must also pay HMRC the total amount deducted from all subcontractors by the 19th of the month (22nd if paying electronically). Late payment results in automatic penalties: £100 for up to one month late, rising to £200, £300, or more for extended delays, plus daily penalties for very late returns.

Monthly returns must be submitted even in months where no payments were made — a nil return is required to confirm the absence of activity.

CIS deductions have a real, immediate impact on a subcontractor roofer's cash flow. If you invoice £5,000 in a month (labour + materials), your labour element might be £3,500. At 20% CIS, you receive £4,300 instead of £5,000. That £700 is held by HMRC until you file your Self Assessment and any overpayment is returned — potentially 10–12 months after it was deducted.

Cash flow management strategies for CIS subcontractors:

• Separate materials from labour clearly on every invoice. Materials are not subject to CIS deduction — if you supply materials and do not separate them, contractors may deduct CIS from the whole invoice, overtaxing you and creating a reclaim you have to pursue
• Apply for gross payment status once your business has a three-year compliance track record. This eliminates the deduction entirely and the cash flow benefit is substantial
• Set aside the 20% deduction amount yourself even though the contractor handles the actual deduction. This ensures you are not surprised by a Self Assessment bill if deductions made on your behalf don't fully cover your tax liability (which can happen if you have other income or if your total income results in higher-rate tax)
• Keep records of all deduction statements. Contractors must give you a CIS deduction statement for every payment. These statements are your evidence for claiming credit at Self Assessment

CIS mistakes cost roofing businesses real money. The most common errors:

Not registering for CIS before taking subcontract work. An unregistered subcontractor is charged the 30% deduction rate — 10 percentage points higher than the standard rate. Registering with HMRC is free and takes minutes online. There is no excuse for paying the higher rate.

Mixing materials and labour on invoices. If your invoice says simply "Roofing works — £5,000" with no breakdown, the contractor may deduct CIS from the full £5,000. If £2,000 of that was materials, you have been overtaxed. Always separate labour and materials clearly on every CIS invoice.

Contractor fails to verify before paying. If you are a contractor and pay a subcontractor without first verifying them, you are liable for the deduction amount even if you paid the subcontractor in full. HMRC pursues contractors for undeducted amounts.

Missing monthly return deadlines. Even a single missed monthly return generates an automatic penalty. Use accounting software or a bookkeeper to ensure returns go in on time every month, including nil returns in quiet months.

Not keeping deduction statements. Contractors must provide CIS deduction statements; subcontractors must keep them. These are your primary evidence for reclaiming overpaid tax at Self Assessment. If you lose them, you can request them from the contractor, but this takes time and creates friction at an already stressful point in the tax year.