The Scheme sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses.
Under the scheme all payments made from contractors to subcontractors must take account of the subcontractor's tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to HM Revenue & Customs from that part of the payment that does not represent the cost of materials incurred by the subcontractor.
Full details can be found using the following link:
http://www.hmrc.gov.uk/cis/cis-intro.htm