CIS Tax Bridging Loans
The Construction Industry Scheme creates unique tax cash flow challenges. Contractors deduct CIS tax (20% or 30%) from subcontractor payments and remit monthly to HMRC.
Construction Industry Scheme Finance
For businesses with large subcontractor spend relative to their own revenue collection, this creates a structural mismatch - paying out CIS deductions before receiving payment on their own contracts. Bridging finance covers the monthly CIS remittance while awaiting contract receipts.
CIS Bridging Finance - August 2026
| Situation | Rate | Security | Notes |
|---|---|---|---|
| Monthly CIS remittance - timing gap | 0.65%-0.80%/month | Business or personal property | Bridge the 19th monthly deadline until contract receipts arrive. |
| CIS arrears - 1-3 months outstanding | 0.70%-0.90%/month | Property required | Clear CIS arrears. Exit: contract payment received. |
| CIS verifications backlog - deductions withheld | 0.75%-0.90%/month | Property security | Subcontractor deductions withheld pending CIS verification resolution. |
| Combined CIS and PAYE arrears | 0.80%-1.00%/month | Best available security | Construction sector frequently sees both CIS and PAYE simultaneously. |
| Gross payment status application - bridging during review | 0.70%-0.85%/month | Property security | Bridge CIS liability while gross payment status application is processed. |
Indicative rates - August 2026. Rates change daily. Actual rate depends on LTV, security, credit profile, loan size, and exit strategy. Contact our team for a live rate comparison for your specific case. All rates sourced from lender product sheets and publicly available market data.
What determines your rate
The CIS cash flow mismatch
A main contractor paying 50 subcontractors each month may remit £40,000-£200,000+ in CIS deductions to HMRC on the 19th - before receiving payment on their own construction contracts (which may have 30-60 day payment terms). This timing mismatch is structural and recurring, not a sign of business failure. Bridging fills this gap month by month.
Gross payment status
Subcontractors with gross payment status do not have CIS deductions withheld - they receive payments in full and settle their own tax. Applying for gross payment status reduces the monthly bridging need. However, HMRC's application process takes time and requires a clean compliance record - which is difficult if CIS arrears already exist. Bridging to clear the arrears may be a prerequisite for the gross payment status application.
CIS penalties
Failure to file a CIS monthly return on time: up to £3,000 per return (£100 initial + rising to £3,000 for persistent failure). Failure to pay CIS deductions: 7.75% p.a. interest plus potential penalty charges. The monthly deadline and the financial penalty for missing it make CIS one of the most time-critical tax obligations in the construction sector.
Subcontractor verification
If a subcontractor is not registered with CIS or cannot be verified, the contractor must deduct 30% (rather than the standard 20%). Verification disputes and backlogs can create large unexpected CIS liabilities. Bridging covers the immediate HMRC payment while the verification is resolved.
Worked cost example
Scenario: Civil engineering contractor with £800,000/month subcontractor spend. CIS deductions: £160,000/month (20%). Contract receipts arrive 45 days after invoice. CIS due to HMRC on 19th - before any receipts.
Monthly CIS bridge: £160,000 at 0.70%/month. Bridge term: 45 days until contract receipts clear.
Monthly bridge cost: £1,120 interest + pro-rated arrangement fee ≈ £1,500/month total.
HMRC late payment penalty for missing the £160,000 deadline by 30 days: interest £1,022 + penalty notices + enforcement risk.
Annual cost of bridging solution: £18,000/year (12 months × £1,500).
Annual cost of consistently missing the deadline: £12,264 in interest alone - plus penalties and compliance damage.
Bridge is more expensive than TTP but provides certainty and preserves the compliance record.
Rate context and outlook
The construction sector is the highest-volume CIS tax arrears category in HMRC's enforcement statistics. The combination of long payment terms, large subcontractor spend, and monthly CIS obligations creates structural pressure that is not unique to any one company. DBF has arranged CIS bridging for contractors across residential development, civil engineering, and commercial fit-out. The construction sector is already a core DBF audience through development finance and commercial bridging.
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Frequently asked questions
What is the CIS monthly deadline?
The CIS monthly return must be filed and payment made to HMRC by the 19th of each month (or 22nd for electronic payments) for the preceding tax month. Both the filing and the payment must occur by this date - filing without paying still results in a penalty for late payment. The 19th deadline does not move for weekends or bank holidays.
Can subcontractors use bridging finance for CIS issues?
Subcontractors' CIS issues are different from contractors' - subcontractors have CIS deducted at source rather than remitting it themselves. Subcontractors may face self-assessment demands where their CIS deductions exceed their actual tax liability (they receive a refund) or where deductions were insufficient. Bridging can cover a self-assessment shortfall for subcontractors on the same basis as any other self-assessment case.
What is gross payment status and how does it help?
Gross payment status (GPS) means a subcontractor receives contract payments in full with no CIS deduction. To qualify for GPS, the subcontractor must have a good compliance record (all returns filed, all payments on time, turnover above a minimum threshold). GPS eliminates the monthly CIS deduction cash flow mismatch and the verification administrative burden for the contractor. It takes 3-6 months to arrange and requires HMRC review.
Can I combine CIS bridging with invoice finance?
Yes - invoice finance is another tool for the CIS cash flow mismatch. Where a contractor has invoiced its clients but not been paid, invoice finance advances against those invoices immediately. This can solve the underlying timing problem rather than just bridging the monthly gap. Where a business has suitable invoices, invoice finance may be more cost-effective than bridging. We can advise on both options.
What if HMRC has already issued a formal demand for CIS arrears?
If HMRC has already issued a formal demand, act immediately. Bridge the arrears before HMRC escalates to distraint or court action. The cost of bridging is almost always lower than the cost of HMRC enforcement (legal costs, disruption, CCJ damage to credit). Contact us - we can often have indicative terms within hours for urgent CIS cases.
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