Registering allows contractors to manage their tax and employment risk, and subcontractors the opportunity to make regular contributions towards their national insurance (NI) and tax.

Although it’s not compulsory for subcontractors to register for CIS, one of the benefits of signing up means tax and NI is deducted at a rate of 20% instead of the higher 30%.

So, if you’re a contractor or subcontractor and are wondering how to register with the CIS (Construction Industry Scheme), then we’ve got everything you need to know.

Registering as a contractor

Registering with the CIS (Construction Industry Scheme) as soon as your business becomes a contractor is essential. You must register before you take on your first subcontractor.

You are defined as a contractor by HMRC if:

  • You take on subcontractors to perform some of the contract work.
  • Or when your average annual spend on construction operations over a 3-year period exceeds over £1 million.

When working with subcontractors, you must register as a contractor through the Government website. This is done step-by-step through a simple ‘Register as an employer’ form.

Once registered, these are the rules that you are required to follow:

01.

You must check the employment status of each individual. You should confirm whether the person should be employed or subcontracted.

02.

You’ll need to confirm the subcontractors are registered with HMRC before you can begin paying them. This is done through their UTR number.

03.

You will need to deduct payments from them and transfer the money to HMRC. The CIS deductions are an upfront payment for the subcontractor’s tax and National Insurance liabilities.

04.

To ensure compliance with CIS regulations, filing monthly returns and maintaining complete records is necessary.

HMRC also operate a useful CIS helpline and online services, which can be handy if you need any advice during the process. You can call them on 0300 200 3210 or ask their digital assistant.

Staying CIS compliant

Learn more information on staying CIS compliant as a contractor.

Registering as a subcontractor

You register for a subcontractor under CIS if you work for a contractor and you’re one of the following:

  • a sole trader
  • the owner of a limited company

Under CIS, a contractor must deduct 20% from your payments and pass it to HM Revenue and Customs (HMRC). These deductions count as advance payments towards your tax and National Insurance bill.

If you do not register for the Construction Industry Scheme, contractors are legally required to deduct a larger amount from any payments made to you.

If you haven’t registered as self-employed yet, get in touch with HMRC to complete your self-assessment here.

Once you’ve registered, you will:

01.

Receive a Government Gateway ID (by email) & UTR number (by post)

02.

On the HMRC website, select the option to register for CIS using your government gateway ID.

03.

Also need to choose your CIS payment status (net pay or gross pay; more information on this is below)

Pass your UTR and NI number onto the contractor when you start work and before your first payment date. Indigo can help support subcontractors to stay CIS compliant, find out more.

Staying CIS compliant

Learn more information on staying CIS compliant as a subcontractor.

If you’re a subcontractor and a CIS contractor (you pay subcontractors to do construction work), you’ll need to register for CIS as both.

Why it’s important to register for CIS

If you’re an independent contractor or a subcontractor in the construction industry, it is essential to enrol in the Construction Industry Scheme (CIS). Failure to register will result in a 30% tax deduction from a subcontractor’s earnings, instead of the standard 20%.

Also, misclassification of the employment status could result in tribunals and unpredicted costs. Read a recent tribunal case study to see how it could effect your business.

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How Indigo can help

Indigo is a CIS specialist; we step into the contractual chain as a Commercial Contractor; we not only professionally assess, engage and verify subcontractors with HMRC but also take on all the commercial, legal and tax responsibilities of contracting. We help to give peace of mind that subcontractors are protected from reclassification by HMRC, and carry the risk ensuring your business would never have to go to court.