f you’re a property developer hiring subcontractors, the Construction Industry Scheme (CIS) might already be part of your world, even if you’re not a builder yourself. And getting it wrong? That can cost you time, money, and missed opportunities.

From unnecessary tax deductions to unexpected HMRC penalties, the CIS can become a serious burden if not managed properly. But with the right systems in place, it can be streamlined, compliant, and even used to your advantage.

CIS Is Not Just for Builders

Many developers assume CIS only applies to construction companies or tradespeople. But if you hire subcontractors for construction-related work, even through a limited company, you may be considered a “contractor” under the scheme.

This means you must:

• Register for CIS with HMRC
• Verify subcontractors’ status
• Deduct tax (if applicable) before paying them
• Submit monthly returns

If you’re managing multiple sites, contractors, or joint ventures, this becomes even more important to get right.

And it’s not just developers. Under HMRC’s deemed contractor rules, even property investors can be caught by CIS if they’ve spent more than £3 million on construction operations in the past 12 months, or if their construction spend averages over £1 million per year across 3 years. This threshold can trigger CIS obligations even if you don’t see yourself as a traditional developer.

If you’re unsure whether you qualify as a deemed contractor, it’s essential to get advice early, CIS compliance is based on spend, not just job titles.

What CIS Means for Developers Hiring Subcontractors

Under CIS, contractors must withhold tax at source from payments made to subcontractors unless the subcontractor has gross payment status. This can affect:

• Your subcontractor relationships (if payments are delayed)
• Your cash flow (if errors result in over- or underpayments)
• Your admin load (monthly filings and records must be precise)

Even if you’re outsourcing some of the site work or using managing agents, the responsibility still falls on you to comply.

How Deductions and Registrations Work

The typical CIS deduction is:

• 20% for registered subcontractors
• 30% for unregistered subcontractors
• 0% if the subcontractor has gross payment status

To avoid fines and mis-payments:

• Register both yourself (CIS suffered) and your subcontractors (CIS paid) with HMRC
• Verify subcontractors before payment
• Keep clear records of all payments, invoices, and deductions
• Submit CIS returns by the 19th of each month following the payment

Incorrect filings or missed deadlines can result in automatic penalties, which can snowball quickly.

Avoiding Fines Through Proper Reporting

Every month you must:

• File a CIS return detailing all subcontractor payments and deductions
• Provide a payment and deduction statement to each subcontractor
• Pay the deductions to HMRC on time

Even one missed return can cost £100. Continued delays mean escalating penalties, with daily fines and a risk of further compliance checks.

At GoldHouse, we automate CIS for clients using cloud software that connects your accounting, payroll, and reporting so you can avoid the stress of manual mistakes.

When to Gross Register and When Not To

Gross payment status allows subcontractors to receive full payment without deductions. But not everyone qualifies.

To apply, a subcontractor must:

• Have a business bank account
• Keep up with HMRC filing and payments
• Prove a good record of tax compliance and turnover thresholds

As a developer, you don’t apply for gross payment status, but it affects how you pay and deduct tax from those you hire. Knowing who’s eligible, and when to verify, helps keep your cash flow smooth and your relationships solid.

Tips for Streamlining CIS in Your Accounting System

CIS doesn’t have to slow you down. With the right setup, it can be seamlessly integrated into your accounting process.

We recommend:

• Using accounting software with CIS functionality (like Xero or QuickBooks)
• Keeping all subcontractor verifications and UTRs recorded
• Automating reminders for monthly return deadlines
• Outsourcing CIS reporting to a trusted accountant who understands property development

This frees up your team to focus on build progress, not tax admin and ensures every pound is properly accounted for and protected.

Making CIS Work for Your Business, Not Against It

The right CIS setup is more than just compliance, it’s part of your financial strategy. At GoldHouse, we give developers like you the confidence to grow fast, scale cleanly, and stay on HMRC’s good side.

Book a consultation today to simplify your CIS obligations and build smarter with our tax, accounting, and advisory support.