Registering for CIS as a Contractor: What It Means When You Hire Subs

‍‌‌​​‌‌‌​​​​​‌‌‌‌‌​​​​‌‌‌​​​​​​‌​‍SiteKiln gives you plain-English information, not legal advice. If you need advice specific to your situation, talk to a qualified accountant or solicitor.

If you're paying other people for labour on site, chances are HMRC sees you as a CIS contractor -- even if you're also a subbie to someone else. Get this wrong and the fines rack up fast.

1. First question: are you a CIS contractor?

HMRC say you're a contractor if:

• You pay subcontractors for construction work (labour or labour-plus-materials) in the UK; or
• You're not in construction but you've spent over £3m on construction in any 12-month period (deemed contractor).

You're a subcontractor if you get paid by a contractor for construction work.

You can be both at the same time -- paid by a main contractor, but also paying your own subbies.

If you pay anyone for construction work on your jobs, treat yourself as a contractor and carry on reading.

2. Before CIS: register as an employer (even if you have no employees)

HMRC's process is slightly backwards: to run CIS as a contractor, you first register as an employer and set up a PAYE scheme.

You need:

• Government Gateway account.
• Your UTR (sole trader or company).
• Your business/legal name and address.

Steps:

1. Go to HMRC online and register as an employer / set up PAYE.
2. Wait for HMRC to send you your PAYE reference and Accounts Office reference by post (usually around 10 days).
3. You need these PAYE details before you can bolt CIS on.

3. Register for CIS as a contractor

Once you have a PAYE scheme:

1. Log into your Government Gateway.
2. Add the Construction Industry Scheme (CIS) service and register as a contractor.
3. HMRC will ask for:
   • Business name and trading name.
   • UTR and National Insurance (or company/CT details).
   • Whether you're a contractor, subcontractor, or both.
4. They'll then confirm your CIS registration details -- keep that letter/email safe.

You must do this before you pay your first subcontractor.

4. Work out who's an employee and who's a subbie

HMRC cares a lot about status -- is this person really self-employed or actually an employee?

• Use HMRC's employment status checker or take advice if you're unsure.
• Employees go through PAYE (tax and NI like normal wages).
• Genuine subcontractors are paid under CIS, with tax deducted from their labour.

If HMRC later decide someone you treated as a subbie is really an employee, they can chase you for the PAYE and NI you should have deducted.

5. Before you pay: verify each subcontractor

Before the first payment to a new subbie, you must verify them with HMRC.

You can do this:

• Through HMRC's CIS online service; or
• Through CIS-enabled software.

You'll need:

• Their name or business name.
• Their UTR.
• Their National Insurance number (for individuals) or company number (for companies).

HMRC then tell you what deduction rate to use on their labour:

• 20% -- standard rate (registered CIS subcontractor).
• 30% -- higher rate (not registered, or details don't match).
• 0% -- gross status (they're allowed to be paid gross and sort tax themselves).

6. Paying your subbies under CIS

For each payment run:

Separate materials from labour

Only take CIS off the labour element. Genuine materials, VAT and certain plant costs are excluded from the deduction.

Apply the correct deduction rate

Multiply the labour amount by 20% / 30% / 0% as HMRC told you when you verified.

Pay the subcontractor

Pay them the net amount (labour minus CIS) plus the materials and VAT as appropriate.

Give them a CIS statement

A payslip/statement each month showing gross, materials, CIS deducted, and net paid.

Those deductions are tax you now owe HMRC -- you're basically collecting their tax at source.

7. Monthly CIS returns and payments

Every single tax month (6th to 5th) you must:

• File a CIS return to HMRC by the 19th of the following month.
• Pay the CIS tax you deducted (along with PAYE/NI) usually by the 22nd if paying electronically.

Returns must be filed even if you paid no subbies that month -- that's a nil return.

Late filing penalties stack up like this:

• 1 day late -- £100.
• 2 months late -- another £200.
• 6 and 12 months late -- further penalties (often £300 or 5% of the tax, whichever is more).

Get into the habit: "file by the 19th, pay by the 22nd" and you'll stay out of trouble.

8. Common mistakes

• Starting to pay lads but not registering as a contractor -- HMRC eventually catch up and can backdate penalties and tax.
• Not verifying subbies and just using 20% on everyone -- if they should have been 30% or 0%, you're on the hook for the difference.
• Deducting CIS off materials by mistake -- you'll have angry subbies and messy corrections to make.
• Forgetting nil returns -- "we had a quiet month" is still a £100 fine if you don't file.
• Mixing up CIS and PAYE -- not realising that employees go through PAYE, not CIS, and then facing a big PAYE bill later.

9. Who to contact

• GOV.UK -- Construction Industry Scheme (CIS) -- who's a contractor, who's a subcontractor, and the basic rules: gov.uk/what-is-the-construction-industry-scheme (free)
• GOV.UK -- What you must do as a CIS contractor -- official step-by-step registration: gov.uk/what-you-must-do-as-a-cis-contractor (free)
• CIS340 guide -- HMRC's full PDF guide for contractors and subcontractors: search "CIS340" on gov.uk (free)
• HMRC CIS helpline -- 0300 200 3210 (free)
• HMRC employment status checker -- check if someone is employed or self-employed: gov.uk/check-employment-status-for-tax (free)
• CIS-savvy accountant or payroll bureau -- they can handle verification, returns and payments for you.

10. Related guides on this site

• 8.1 Sole trader vs limited company -- honest comparison
• 8.3 Business bank account -- why you need a separate one
• 8.10 Taking on your first employee -- legal checklist
• S7 Self-employed vs employed -- know what you actually are
• S8 Getting your CIS registration sorted
• S11 Understanding your first payslip -- CIS deductions explained
• 1.6 CIS deductions done wrong or not passed to HMRC

11. Sources and legislation

• Finance Act 2004 -- Part 3, Chapter 3 (sections 57-77) establishes the Construction Industry Scheme. legislation.gov.uk/ukpga/2004/12
• Income Tax Act 2007 -- CIS deduction and payment framework.
• The Income Tax (Construction Industry Scheme) Regulations 2005 (SI 2005/2045) -- detailed CIS rules. legislation.gov.uk/uksi/2005/2045
• HMRC CIS340 guidance -- comprehensive contractor and subcontractor guide. gov.uk
• GOV.UK CIS pages -- registration, verification, returns and payment guidance. gov.uk/what-is-the-construction-industry-scheme

CIS contractor setup -- quick flow

Box 1 -- "Are you a CIS contractor?"

Do you pay anyone for construction work on your jobs (labour or labour + materials) in the UK?

• No -- You're not a CIS contractor. End.
• Yes -- Go to Box 2.

Box 2 -- "Are they employees or subbies?"

Check each person:

• If they're under your control, using your kit, and working like staff -- treat as employee (PAYE, not CIS).
• If they're genuinely self-employed or a separate business -- treat as subcontractor.
• If you have any subcontractors, go to Box 3.

Box 3 -- "Register as an employer (PAYE)"

1. Set up as an employer with HMRC (even if you have no employees yet).
2. Wait for:
   • PAYE reference.
   • Accounts Office reference.
3. Once you have these, go to Box 4.

Box 4 -- "Register for CIS as a contractor"

1. Log into Government Gateway.
2. Add Construction Industry Scheme (CIS) and register as a contractor (or contractor and subcontractor).
3. After HMRC confirm CIS registration, go to Box 5.

Box 5 -- "Verify each subcontractor"

For every new subbie before the first payment:

1. Collect: name, UTR, NI number (or company number).
2. Verify through HMRC CIS online or your software.
3. HMRC tells you the rate:
   • 0% -- gross status.
   • 20% -- standard.
   • 30% -- higher (not registered / mismatch).

Then go to Box 6.

Box 6 -- "Paying subbies under CIS"

For each payment:

1. Split invoice into:
   • Labour.
   • Materials / VAT / plant.
2. Apply CIS rate to labour only (0 / 20 / 30%).
3. Pay:
   • Labour minus CIS deduction.
   • Plus materials and VAT.
4. Give subbie a CIS statement showing gross, materials, CIS taken, and net paid.

Go to Box 7.

Box 7 -- "Monthly CIS returns and payments"

Every tax month (6th-5th):

1. File CIS return by the 19th (include all subbies and deductions, or file a nil return).
2. Pay CIS deductions (with PAYE/NI) by around the 22nd if paying online.
3. Late = automatic penalties starting at £100 and increasing if you keep missing deadlines.

Box 8 -- "Review and tidy regularly"

Each quarter or so:

• Check all subbies verified and rates still correct.
• Make sure you're not deducting CIS off materials by mistake.
• Keep CIS money aside in your business account so you're not short on the 22nd.

That's the whole loop: Are you a contractor? -- Register PAYE -- Register CIS -- Verify -- Deduct -- Statement -- Return -- Pay -- Repeat.

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