A tradesman’s guide to CIS

Mar 31, 2023 | Construction

As a contractor who hires and pays subbies (subcontractors), you legally need to register with CIS (Construction Industry Scheme).

While subbies don’t strictly need to register, it may be a good idea.

In this post, we’ll give you all you need to know about CIS, so the next time one of the boys asks you, you’ll be able to give him a solid answer.


On the job? Here’s CIS in a nutshell

  • Contractors must be signed up to CIS.
  • subcontractors don’t have to register; however, they’ll pay 30% more tax if they don’t.
  • If subcontractors are registered, they’ll get 20% deducted from their pay.
  • CIS was set up to ensure contractors deduct National Insurance and tax from payments made to subbies.


What happens if I don’t register with CIS?

As a contractor

If you’re not registered with CIS, you’ll get fined £3,000, plus £100 for each month deductions haven’t been filed with HMRC.

It’s just not worth losing that much money, so make sure you register for the Construction Industry Scheme online and create an account. You’ll then have access to several tools that can help you manage your business accounts.

Make sure you pay HMRC once you’re registered – if you don’t submit your monthly return on time, you’ll have to pay a fixed penalty of £100.

Non-payment, or missed filing dates, also means:

  • a second fixed penalty of £200 — two months after the filing date
  • tax-geared penalty of either £300 or 5% of any deductions on the return — six months after the filing date
  • second tax-geared penalty of either £300 or 5% of any deductions on the return


As a subcontractor

If you do construction work for a contractor as a subbie, you must register as a subcontractor.

You can be registered as a contractor and a subbie at the same time, so if your line of work crosses over, don’t stress. This is normal.

If you do work for other businesses as well as your own with your subbies, you’ll still need to register. This means you must behave like a contractor or subcontractor according to your job.

If you don’t register for CIS, you’ll have to pay a 30% tax rate — if you’re registered, you’ll get 20% deducted from your pay.


How do deductions work?

If you want to understand the process in full, read the CIS guide on the gov website. It’s not the most exciting read, but it covers everything in detail.


As a contractor

Make sure your subbies are registered with HMRC. Or at least find out first hand whether they are or not. This will make it easier to calculate deductions when they’re paid.

You’ll then need to deduct any tax or National Insurance from your subbies pay and pass this on to HMRC.

Ensure to check through payslips and get the correct dates ahead of time to avoid potential penalties.

You can verify a subcontractor’s status on the gov.uk website.

To make deductions, use the online PAYE and National Insurance payment system, and include the following:

  • the subcontractor’s details
  • details of the payments made, and any deductions withheld
  • a declaration that the employment status of all subcontractors has been considered
  • a declaration that all subcontractors that need to be verified have been verified


As a subcontractor

You have to pay any tax owed, but the reporting of how much tax and National Insurance you have to pay is set by the contractor.

We’d say it’s worth finding out how much you’ll owe ahead of time, however.


What’s covered by CIS?

The scheme includes construction work on:

  • permanent or temporary buildings or structures
  • civil engineering work like roads and bridges

Construction work in the UK (even if you’re registered overseas) includes:

  • site prep – for example, laying foundations and doing access works
  • demolition and dismantling
  • building work
  • alterations, repairs and decorating
  • installing systems for heating, lighting, power, water and ventilation
  • cleaning the inside of buildings after construction work.

You don’t need to register with CIS if you’re a contractor in these areas:

  • architecture and surveying
  • scaffolding hire (with no labour)
  • carpet fitting
  • making materials used in construction, including plant and machinery
  • delivering materials
  • work on construction sites that’s clearly not construction – for example, running a canteen or site facilities.


A lot to take in? Talk to us

CIS is a ballache, we get it. But that’s why we’re here to get you sorted.

We’ve dealt with tradies and CIS for a long time. Not only do we understand the law, but we’re also bloody good at it.

Get in touch to talk about CIS and all things subbie, contractor and getting cheesed off at legislation.

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