Do I need to register for CIS?
You may need to register for CIS if you work in construction, pay subcontractors for construction work, or receive payments from contractors for construction services.
CIS stands for the Construction Industry Scheme. Under the scheme, contractors deduct tax from subcontractor payments and pass it to HMRC. GOV.UK’s Construction Industry Scheme overview explains that the deductions count as advance payments towards the subcontractor’s tax and National Insurance.
The short version is this: contractors must register for CIS, while subcontractors should register if they want to avoid higher-rate deductions. GOV.UK’s CIS contractor guide says contractors must register before taking on their first subcontractor, and GOV.UK’s CIS subcontractor guide explains that unregistered subcontractors normally suffer higher deductions.
Merranti’s construction industry tax FAQ is a useful starting point because it covers CIS deductions, business structure, tax reliefs, VAT and cash-flow issues for construction businesses.
Contractor or subcontractor: which one are you?
CIS depends on what role you are performing.
A contractor is a business that pays subcontractors for construction work. GOV.UK’s CIS contractor overview says you must register as a contractor if you pay subcontractors to do construction work, or if your business does not do construction work but has spent more than £3 million on construction in the 12 months since the first payment.
A subcontractor is a business that carries out construction work for a contractor. GOV.UK’s CIS subcontractor overview says subcontractors can be sole traders, limited companies, partnerships or trusts.
Some businesses are both. For example, a building company may be paid by a main contractor for construction work, while also paying electricians, plasterers or decorators as subcontractors. In that case, GOV.UK says the business may need to register as both a contractor and subcontractor. GOV.UK’s CIS 340 guide explains this in more detail.
What work is covered by CIS?
CIS covers most construction work to buildings, structures and civil engineering works.
GOV.UK’s Construction Industry Scheme overview lists examples including site preparation, demolition, building work, alterations, repairs, decorating, installing heating, lighting, power, water and ventilation systems, and cleaning the inside of buildings after construction work.
That means CIS can apply to more than obvious new-build projects. Repairs, refurbishment, fit-outs, conversions, decorating and installation work can all be relevant.
There are exclusions. GOV.UK’s CIS overview says some work is outside CIS, including architecture and surveying, scaffolding hire with no labour, carpet fitting, delivering materials and work on construction sites that is clearly not construction.
Merranti’s specialist construction and property accountant page is relevant for businesses where CIS overlaps with construction accounting, property development, VAT reverse charge and wider tax planning.
Why registration matters for subcontractors
Subcontractors should usually register for CIS to avoid higher deductions.
GOV.UK’s CIS subcontractor overview says registered subcontractors usually have deductions made at 20%, while unregistered subcontractors usually have deductions made at 30%.
Those deductions are not an extra tax in principle. They are advance payments towards the subcontractor’s tax and National Insurance. But they can create serious cash-flow pressure.
For example, a subcontractor invoicing £5,000 for labour may receive £4,000 after a 20% deduction, or £3,500 after a 30% deduction if unregistered. That difference can affect wages, materials, van costs, tools and VAT payments.
Merranti’s MTD ITSA guide for partnerships and CIS subcontractors is useful because it explains that CIS subcontractors are still self-employed for tax purposes and may also need to prepare for Making Tax Digital depending on gross income.
What contractors must do
Contractors have more ongoing duties than subcontractors.
GOV.UK’s CIS contractor overview says contractors must register before taking on their first subcontractor, check whether the worker should be employed instead, verify subcontractors with HMRC, make deductions where required, file monthly returns, keep full CIS records and tell HMRC about business changes.
Before paying a new subcontractor, contractors must verify them with HMRC. GOV.UK’s verify subcontractors guidance explains that HMRC will confirm whether the subcontractor is registered and what deduction rate to use.
This is not optional admin. If a contractor pays subcontractors without checking CIS properly, the contractor can become liable for deductions that should have been made.
Merranti’s article on a landmark victory for contractors in CIS disputes explains how “accidental CIS” can create disputes where a business did not realise it was caught by the rules.
Monthly CIS returns
CIS contractors usually need to file monthly returns.
GOV.UK’s CIS contractor overview says contractors must file monthly returns and keep full CIS records, and penalties may apply if they do not.
A monthly CIS return normally tells HMRC which subcontractors were paid, the gross amount, any materials element and the CIS deduction made. The return must be accurate because subcontractors rely on CIS deduction statements to claim tax already deducted.
Merranti’s construction industry tax FAQ explains that limited companies registered as CIS subcontractors also need their payroll system set up correctly to reclaim CIS suffered through an Employer Payment Summary.
Gross payment status
Gross payment status allows a subcontractor to be paid without CIS deductions.
GOV.UK’s CIS subcontractor overview says subcontractors can apply for gross payment status if they do not want deductions made in advance by contractors.
Gross payment status can improve cash flow, but it comes with compliance conditions. If HMRC withdraws gross payment status, a subcontractor may suddenly move from being paid gross to having deductions made at source.
Merranti’s changes to CIS compliance checks article explains why timely tax returns, CIS returns and payments matter when applying for or keeping gross payment status.
Merranti’s article on HMRC penalties and repayment delays is also relevant because CIS repayments and gross payment status can create cash-flow pressure where compliance records are not clean.
CIS and employment status
CIS does not automatically mean someone is self-employed.
GOV.UK’s CIS contractor overview says contractors must check whether the person should be treated as an employee instead of a subcontractor, and penalties can apply if they should have been employed.
This matters because employment status affects PAYE, National Insurance, workplace pensions, holiday pay, employment rights and tax risk.
Merranti’s PAYE registration guide is a useful internal link because construction businesses may need CIS, PAYE, VAT and Self Assessment registrations depending on how they operate.
If workers are paid like employees but treated as subcontractors, the business may have more than a CIS problem.
CIS and VAT reverse charge
CIS often overlaps with the VAT domestic reverse charge for construction services.
GOV.UK’s VAT reverse charge technical guide explains when the domestic reverse charge applies to building and construction services. Merranti’s VAT reverse charge for construction article explains why this is a critical compliance issue for VAT-registered businesses operating under CIS.
This matters because CIS and VAT are separate systems, but they often apply to the same construction supply chain. A contractor might need to verify a subcontractor under CIS while also applying reverse charge VAT treatment to the invoice.
Merranti’s VAT registration guide is useful if a construction business is approaching the VAT threshold, while Merranti’s company vehicles and tax guide may be relevant for construction businesses buying vans, tools and equipment.
Property businesses and accidental CIS
CIS is not only a problem for traditional builders.
Property developers, landlords and investors can be caught where they pay subcontractors for construction work. GOV.UK’s CIS 340 guide explains that some businesses are treated as contractors if they spend more than £3 million on construction within a 12-month period.
Merranti’s guide on what property businesses need to know about CIS explains how landlords, developers and property investors can be caught by the scheme during refurbishments, conversions and development projects.
Merranti’s property and construction accountant page is also a relevant service link for businesses where property development, construction accounting, VAT and CIS overlap.
CIS, Self Assessment and tax refunds
For sole trader subcontractors, CIS deductions are usually dealt with through Self Assessment. The deductions reduce the final tax and National Insurance bill and may result in a repayment if too much has been deducted.
GOV.UK’s CIS subcontractor overview explains that CIS deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.
Merranti’s Self Assessment tax return guide is useful for subcontractors who need to file a return, claim CIS deductions and report expenses properly. Merranti’s sole trader expenses guide is also relevant because CIS subcontractors still need to record allowable expenses such as tools, travel, protective clothing and business costs.
For limited company subcontractors, the process can be different. Merranti’s construction industry tax FAQ explains that companies may need to reclaim CIS deductions through payroll using an Employer Payment Summary.
Speak to Merranti before CIS goes wrong
CIS is manageable when it is set up correctly. The problems usually start when a business pays subcontractors without registering, fails to verify subcontractors, ignores monthly returns, misses gross payment status conditions or does not realise property work is caught.
Merranti’s construction industry tax FAQ, VAT reverse charge guide, CIS property business guide, CIS compliance checks article, MTD guide for CIS subcontractors and business registration guide cover the main connected issues.
If you are unsure whether CIS applies, need to register, or have already paid subcontractors without making deductions, contact Merranti Accounting before the position becomes harder to fix.
Do I need to register for CIS as a contractor?
Yes, if you pay subcontractors to do construction work. GOV.UK’s CIS contractor guidance explains that contractors must register before taking on their first subcontractor.
Do I need to register for CIS as a subcontractor?
Subcontractors do not have to register, but if they do not register, contractors must usually deduct 30% instead of 20%. GOV.UK’s CIS subcontractor guidance explains the difference.
What work is covered by CIS?
CIS covers most construction work to buildings, structures and civil engineering works. GOV.UK’s Construction Industry Scheme overview lists examples such as site preparation, demolition, building work, alterations, repairs, decorating and installing heating, lighting, power, water and ventilation systems.
Can property businesses be caught by CIS?
Yes. Property developers, landlords and investors can be caught where they pay for construction operations or become deemed contractors. Merranti’s guide on what property businesses need to know about CIS explains this risk.
What is gross payment status?
Gross payment status allows eligible subcontractors to be paid without CIS deductions. GOV.UK’s CIS subcontractor guidance explains that subcontractors can apply for gross payment status, and Merranti’s CIS compliance checks article explains why compliance history matters.
