How to Register as a CIS Contractor or Subcontractor

The Construction Industry Scheme (CIS) applies to most businesses and self-employed workers operating in the UK construction sector. Whether you are taking on subbies for the first time or just starting out as a subcontractor yourself, getting registered correctly from the outset saves you money, avoids penalties, and keeps HMRC off your back. This guide covers who needs to register, how to do it, and what to expect once you are set up — whether you are a construction business, a sole trader, or a limited company.

If you would rather not deal with HMRC registration yourself, NDCA registers contractors and subcontractors for CIS as part of our fixed monthly fee — see how it works below, or book a free 15-minute call.

• What is the Construction Industry Scheme?
• Who must register under CIS?
• How to register as a CIS contractor
• How to register as a CIS subcontractor
• Gross payment status — and why it matters
• CIS deductions and monthly returns
• CIS and limited companies
• Common mistakes when registering for CIS
• Frequently asked questions

What is the Construction Industry Scheme?

CIS is a tax scheme run by HMRC that sets out how contractors must handle payments to subcontractors working in the construction industry. Under the scheme, contractors deduct money from a subcontractor’s pay and pass it directly to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.

The scheme exists to reduce tax evasion in the construction sector, where cash-in-hand working has historically been common. It covers a wide range of work — not just bricklaying or roofing, but also site preparation, installation, repairs, decorating, and demolition.

It does not cover architecture, surveying, scaffolding hire (without labour), carpet fitting, or the delivery of materials. If your work sits on the border, check the latest HMRC guidance to confirm whether it falls within the scheme.

Who must register under CIS?

Contractors

You are a contractor under CIS if you pay subcontractors for construction work. This applies whether you are a sole trader, a partnership, or a limited company. It also applies to businesses that are not primarily in construction but spend more than £1 million per year on construction work — property developers and large retailers, for example, can fall into this category.

Subcontractors

You are a subcontractor if you carry out construction work for a contractor. Again, this applies regardless of your business structure. You can be both a contractor and a subcontractor at the same time — if you take on work from a main contractor and then use your own subbies, you sit in both camps.

Employed workers

CIS does not apply to your own employees. If someone is genuinely employed by you and on your payroll, you deduct tax and National Insurance through PAYE, not CIS. HMRC takes employment status seriously in construction — misclassifying an employee as a subcontractor is a risk you want to avoid.

How to register as a CIS contractor

Before you can make your first payment to a subcontractor under CIS, you must register as a contractor with HMRC. Here is how to do it.

Registering as a contractor involves several linked steps: setting up PAYE for Employers with HMRC (required even if you have no employees), adding the Construction Industry Scheme to that registration, verifying every subcontractor with HMRC before you pay them for the first time so you deduct at the correct rate, and then filing a CIS return every month — even in months you pay no one. Missing a step, using the wrong deduction rate, or filing late all carry penalties.

How to register as a CIS subcontractor

Registering as a subcontractor is straightforward but important. If you are not registered, contractors must deduct 30% from your payments rather than 20%. On a large contract, that difference adds up quickly.

What you need before you register

Depending on your business structure, HMRC will ask for different details:

• Sole trader — your National Insurance number, Unique Taxpayer Reference (UTR), and legal name
• Partnership — the partnership’s UTR, the nominated partner’s UTR and National Insurance number, and the partnership’s legal name
• Limited company — the company’s UTR, company registration number, and registered company name

If you do not yet have a UTR, you will need to register for self assessment first (if you are a sole trader or partner). Limited companies receive a UTR automatically when they register with Companies House.

You can register as a CIS subcontractor online through the Government Gateway or by phone with HMRC — registration is free. Once you are registered, contractors deduct tax at 20% instead of 30% from your payments. Those deductions are not a penalty; they are advance payments against the tax you will owe, which you offset or reclaim through your self assessment or company tax return.

Gross payment status — and why it matters

Gross payment status means a contractor pays you in full with no CIS deduction. You then pay your own tax directly to HMRC through self assessment or your company’s corporation tax return. This is a significant cash flow advantage — money that would otherwise be held back by HMRC stays in your business for longer.

How to apply for gross payment status

You can apply when you register as a subcontractor, or at any point afterwards through your Government Gateway account. HMRC will check three things:

• Business test — you must be genuinely working in the construction industry
• Turnover test — your net construction turnover (excluding VAT and materials) must meet a minimum threshold. Check the latest HMRC guidance for current figures on the threshold that applies to your business structure.
• Compliance test — you must have filed all your tax returns and paid all tax on time for the past 12 months

If HMRC grants gross payment status, they will review it annually. Any missed returns or late payments can result in status being withdrawn, which is why keeping your bookkeeping up to date matters throughout the year.

CIS deductions and monthly returns

How deductions work for subcontractors

Deductions are calculated on your labour element only — not on the cost of materials. If you invoice £5,000 for labour and £1,000 for materials, the 20% deduction applies only to the £5,000. The contractor must give you a payment and deduction statement each time they pay you, so you have a record to use in your tax return.

Reclaiming deductions

At the end of the tax year, you add up all the CIS deductions you have suffered and offset them against your income tax or corporation tax bill. If you have overpaid (which is common in quieter trading years), HMRC will refund the difference. Make sure you keep all your payment and deduction statements — your accountant will need them. Managing your cash flow through the year is easier when you know exactly how much has already been paid on your behalf.

VAT and CIS

CIS deductions and VAT are completely separate. If you are VAT-registered, VAT is charged on top of the full invoice and is not subject to CIS deductions. However, if you are in the construction sector and your customer is another VAT-registered construction business, you also need to be aware of the domestic reverse charge for construction services. Under the reverse charge, the customer accounts for the VAT rather than the supplier. If this applies to you, do not charge VAT on the affected invoices — the contractor handles it instead. Check HMRC guidance to confirm whether the reverse charge applies to your specific work.

If your turnover is approaching £90,000 (the VAT registration threshold in 2025/26), you need to register for VAT. We can handle your VAT returns once you are registered.

CIS and limited companies

If you operate through a limited company, CIS still applies — both as a contractor and as a subcontractor. There are a few extra points worth knowing.

Corporation tax, not income tax

A limited company pays corporation tax on its profits, not income tax. In 2025/26, the small profits rate is 19% on profits up to £50,000, and the main rate is 25% on profits over £250,000, with marginal relief applying between those thresholds. CIS deductions suffered by a company offset the company’s corporation tax liability, not the directors’ personal tax bills. Any excess is refunded to the company.

Director’s salary and dividends

As a limited company director, you will likely pay yourself a salary and dividends. CIS deductions do not affect this — they sit at company level. Your personal self assessment return covers your salary and dividends separately.

Annual accounts

Limited companies must file annual accounts with Companies House each year. Your CIS deductions and contractor payments should flow through your accounts correctly, which is why accurate bookkeeping throughout the year is essential.

Common mistakes when registering for CIS

These are the errors we see most often when new contractors and subcontractors first set up under CIS:

1. Not registering before making the first payment. A contractor who pays a subcontractor before verifying them and before registering as a contractor can face penalties from HMRC.
2. Deducting from the full invoice rather than just the labour element. CIS deductions apply to labour only. Deducting from materials as well means you are underpaying the subcontractor and creating a headache at year end.
3. Missing monthly returns. Nil returns still need filing. A missed return triggers an automatic £100 penalty, and the penalties increase the longer the return remains outstanding.
4. Assuming employed workers can be paid under CIS. If someone is legally an employee, they must go through PAYE. Paying them via CIS instead is non-compliant and can result in back-tax and penalties.
5. Not keeping payment and deduction statements. Subcontractors need these to reclaim their CIS deductions at year end. Losing them means extra work trying to track down figures.
6. Applying for gross payment status without checking compliance first. If you have any outstanding returns or unpaid tax, HMRC will reject the application. Sort your compliance position before applying.

If you are unsure about any part of the process, speaking to an accountant before you start is far cheaper than dealing with HMRC penalties afterwards. Our construction accounting specialists at NDCA work with contractors and subcontractors across the UK and can get your CIS setup right from day one.

Getting your finances organised from the start also makes it easier to stay on top of management accounts as your business grows, so you always know where you stand.

Frequently asked questions

Do I need an accountant to register for CIS?

No, you can register directly with HMRC yourself. Where people usually need help is afterwards — verifying subcontractors correctly, applying the right deduction rate, filing monthly returns on time, and reclaiming deductions through your tax return. At NDCA, CIS registration and ongoing monthly compliance are included in our fixed monthly fee, so it is handled correctly without becoming a recurring admin job for you. Book a free call if you would like us to take care of it.

Do I need to register for CIS if I only do occasional construction work?

If you are a subcontractor, yes — you should still register. Without registration, contractors must deduct 30% from your payments instead of 20%. Even occasional work can result in a meaningful amount being held back unnecessarily. Registration is free and straightforward, so there is no good reason to leave it.

How long does CIS registration take?

HMRC typically processes CIS registrations within a few working days when done online. However, delays can occur at busy times. Register before you start work rather than on the day of your first payment.

Can I be both a CIS contractor and a subcontractor at the same time?

Yes. This is common in construction. If you take work from a main contractor and then hire your own subbies to help complete it, you are a subcontractor in relation to the main contractor and a contractor in relation to your own subbies. You must register in both capacities and meet the obligations of each role.

What happens if I do not register for CIS and just let the contractor deduct 30%?

You will get a larger deduction taken from every payment. While you can reclaim any excess at year end through your tax return, you are effectively giving HMRC an interest-free loan for months at a time. This is a real cash flow problem if you are operating on tight margins. Register for CIS and apply for gross payment status if you qualify.

Does CIS apply to sole traders?

Yes. Sole traders working in construction as subcontractors must register under CIS. Sole traders who take on their own subbies must register as contractors too. Your CIS deductions are claimed back through your annual self assessment tax return.

What is the penalty for filing a CIS return late?

The initial penalty for a late monthly CIS return is £100. If the return is two months late, a further £200 penalty applies. Returns that are six months late attract a penalty of £300 or 5% of the CIS deductions due — whichever is higher. At 12 months, the same again. These penalties apply even if you owe no tax, which is why filing nil returns on time matters.