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Subcontractors in the construction industry—overview
E5.501 Construction industry scheme (CIS)—overview
Construction industry tax deduction scheme
Many workers in the construction industry are not subject to contracts of employment (which would bring their earnings within the PAYE tax deduction regulations), but instead are self-employed subcontractors. Legislation was introduced in 19721 to stop the evasion of tax by construction workers, about whom HMRC often had little or no knowledge. The original legislation largely took the form of regulations2 that required a contractor to deduct tax at source from the payments made to a subcontractor. A subcontractor was only exempted from this tax deduction at source if he produced an HMRC certificate that entitled him to receive his payments gross. A subcontractor could only obtain a certificate if he could satisfy HMRC that he was likely to pay tax on his profits, based on his previous
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