Getting started with CIS - contractors, subcontractors and tax agents
In this section:
- Contractor registration and obligations
- Subcontractor registration and obligations
- Using or dealing with subcontractor trading names
- Acting as a tax agent for a CIS contractor or subcontractor
- CIS Online login page
Subcontractor registration and obligations
If you work as a subcontractor under the Construction Industry Scheme (CIS) you must register with HM Revenue & Customs (HMRC) before you start working.
If you don't register with us, contractors have to make a deduction from your payments at the higher rate - 30 per cent.
You may be eligible as a business for 'gross payment' status, which means that deductions won't be made from your payments, but in order to qualify, your business must first be registered with us and secondly must pass several qualifying tests.
This guide will explain how you register with HMRC, whether you're eligible for gross payment status and what else you must do as a subcontractor under CIS.
On this page:
- Subcontractor registration for CIS
- Deciding whether you should receive gross or net payments
- Applying to be paid gross under CIS
- Paying tax as a subcontractor under CIS
- Getting help and advice
Subcontractor registration for CIS
If you're intending to work within construction you'll want to register with us before you start doing so. If you don't register with us, deductions will be made from your payments at the higher rate (30 per cent). You can register by calling our CIS Helpline on Tel 0845 366 7899 (open from 8.00 am to 8.00 pm, seven days a week).
You'll need to tell us the name of the business you want to register - your own name if you trade under it as a self-employed individual - and the unique taxpayer reference number for the business. You can also give us one other trading name for the business.
From April 2007 all new subcontractors should register with us if they don't want higher rate deductions made from their payments. If you were already a subcontractor at April 2007 you did not need to re-register provided that, on 6 April 2007, you had a valid:
- tax certificate CIS5, CIS5(Partner) or CIS6
- permanent registration card CIS4(P)
- temporary registration card CSI4(T)
Find out about the use of trading names under CIS
If you don't have a National Insurance number (NINO)
If you've never paid tax or National Insurance contributions (NICs) in the UK you probably won't have a NINO. Before we can register you as a subcontractor we'll need to check your identity. To do this we'll arrange for you to see someone at your local HMRC Office. Bring along two original documents from this list:
- your birth certificate
- a letter from the Department for Work and Pensions (DWP)showing your NINO (if you have one)
- a utility bill showing your name and current address
- a Council Tax bill showing your name and current address
- your passport
- your driving licence
Get contact details for your local HMRC Office
Deciding whether you should receive gross or net payments
When we register you as a subcontractor we'll automatically set you up to receive payments 'under deduction'. This means contractors must make a deduction at 20 per cent from most of the value of your invoices and pay it over to HMRC. The deduction is held on account of your eventual tax and National Insurance contributions liability. But contractors won't make a deduction from amounts you charge on your invoice for:
- VAT
- Construction Industry Training Board levy
- materials
- consumable stores
- plant hire
- manufacturing or prefabricating materials
If you don't want to have any deductions from your payments you'll need to prove you're eligible. If you can show us your business passes some qualifying tests, we'll grant you gross payment status.
If you don't register with us as a subcontractor you'll have higher deductions made from your payments. Contractors will deduct 30 per cent from your invoices. We will put these deductions against your tax bill for the year if you do later register with us and report your income on a tax return.
Applying to be paid gross under CIS
Before we can grant you gross payment status so you can get paid with no deductions, you'll need to show us that your business passes three tests:
- business test
- turnover test
- compliance test
Find out more about the three tests in our guide to getting paid under CIS
Paying tax as a subcontractor under CIS
We treat the CIS deductions from your invoices as up-front payments towards the tax and Class 4 NICs due from your business. To make sure you pay the right amount of tax for the year as a whole you'll need to submit the appropriate tax return for your business:
- a Self Assessment return for a sole trader or partner
- a Corporation Tax return for a company
If your business is a limited company you can also offset CIS deductions against any PAYE (Pay As You Earn) and Class 1 NICs due or CIS deductions you make from other subcontractors.
When you work out the tax payable by your business, you use the full amount of the invoice. Credit will be given against the tax due for any CIS deductions that contractors have deducted.
When your allowances and expenses are taken into account you may be due a tax repayment. If you owe any additional tax it'll be due by:
- 31 January following the end of the tax year if you're a sole-trader or partner
- nine months and one day after the end of the accounting period if your business is a company
Find out how to submit a Self Assessment tax return
Read about Corporation Tax for companies
Find out how to use more than one trading name under CIS
Getting help and advice
If you have any questions about how to register as a subcontractor, you can call our CIS Helpline on Tel 0845 366 7899 (open from 8.00 am to 8.00 pm, seven days a week).
There's guidance on the HMRC website about the different aspects of CIS, including the tests your business needs to pass to get gross payment status.
