How to Register as a CIS Subcontractor in the UK

Whether you’re new to the construction industry or not, you’ve probably heard your colleagues talking about the Construction Industry Scheme, or been told you should register as a CIS subcontractor. Doing so can save you money in the long term and make filing your end-of-year Self Assessment Tax Return with HMRC much easier.

Follow our step-by-step guide to learn more about CIS, who can register for it, why you should, and how to register as a CIS subcontractor with HMRC. It won’t take you long, but it will be extremely worth it in the end.

Introducing the Construction Industry Scheme (CIS)

If you don’t know already, the Construction Industry Scheme (known as CIS) is a tax scheme that was first introduced in the UK way back in 1971. It is a scheme for contractors and subcontractors working in the construction industry which helps to make paying tax to HMRC easier.

Under CIS, contractors will hold back 20% of your pay as tax and then pass this onto HMRC. The 20% – which is applied to the labour portion of your invoice only, not to materials or equipment – you pay acts like a credit against your self-employed HMRC account. When you come to file your Self Assessment Return at the end of the financial year, all of the CIS payments your contractor(s) have made on your behalf will be waiting for you to apply them against the tax you owe.

Why subcontractors should register for CIS

It might seem unfair to ‘lose’ 20% of your take-home pay to the Construction Industry Scheme, but it’s actually in your best interests. If you don’t register for CIS, then the contractors you work for are still obliged to withhold tax on your behalf, except at 30% this time, instead of 20%.

Basically, by registering as a CIS subcontractor you save an extra 10% on every payslip you get for every job you complete. For example, if you make £2,000 one month, then if you’re not CIS registered your contractor would withhold £600 of this for HMRC. Whereas if you are registered for CIS, your contractor would only withhold £400.

In a similar vein, CIS payments build up against your sole trader or self-employed HMRC account. At the end of the year, you have a certain amount of credit which you’ve already paid to use against your tax bill. If your CIS credit is more than your tax bill, then you will receive a refund. This is quite a common scenario, meaning that you could potentially look forward to a nice bit of extra cash once you’ve filed your tax return.

Who qualifies as a CIS subcontractor and what work counts?

Almost any self-employed person working in the construction industry qualifies for CIS, though whether or not they can successfully register depends on the type of construction work they do.

Work which qualifies a subcontractor for CIS

HMRC lays out the following guidelines to work which qualifies a subcontractor for CIS:

• Site preparation
• Alterations
• Dismantling
• Construction
• Repairs
• Decorating
• Demolition

Work which does not quality a subcontractor for CIS

According to those same HMRC guidelines, work which does not qualify for CIS includes:

• Architecture and surveying
• Scaffolding hire (with no labour; with labour would qualify for CIS)
• Carpet fitting
• Delivering materials
• Work on construction sites that is clearly not construction, for example running a canteen or site facilities

So, if you work in any of the areas which are covered by CIS, then you may be able to register as a CIS subcontractor. Of course, you’d need to be a subcontractor, not a contractor. Subcontractors are defined as self-employed people and partnerships (including sole traders and limited companies) which carry out construction work for a contractor.

What about subcontractors who have other subcontractors working for them?

Things get a little more complicated when you consider that subcontractors may have their own subcontractors working for them. In such a situation, they have to register as both a CIS subcontractor and a CIS contractor.

How to register as a CIS subcontractor in two simple steps

To register for CIS as a subcontractor, you first have to be registered as self-employed.

Step 1: Registering as self-employed

Registering as a sole trader and effectively becoming your own boss can be a daunting step to take, but with work lined up for you in the construction industry it is also a necessary step.

To register as self-employed, you’ll need to follow these steps:

1. Head over to HMRC’s Self Assessment registration portal
2. Scroll down and click ‘Sign in’; you’ll need your Government Gateway user ID and password at this point, if you haven’t got one you’ll need to sign up for one first
3. Sign into the portal using your existing or new Government Gateway ID and password
4. Fill out the Self Assessment registration forms with all relevant information, including:
   1. Your name, birth date, and NI number
   1. Contact information including your UK address, email, and phone number
   1. The name of your business (which can be your own name), description of the construction work you do, and the start date for when you began, or plan to begin, practicing self-employed business
   1. Approved form of identification, such as a UK passport or driving licence
   1. Payslips or a P60
5. Complete registration and wait to receive your Unique Taxpayer Reference (UTR) number; you’ll need this in order to register for CIS; it can take up to 28 working days for HMRC to process your application

Step two: Registering CIS as a subcontractor

Once you’ve registered as a sole trader or another type of self-employed subcontractor, it’s time to register for CIS. Let’s walk through the steps.

1. With your UTR and Government Gateway ID and password to hand, click on HMRC’s link to register for CIS
2. Sign-in to the Government Gateway portal using your ID and password
3. Fill out the application form according to your personal circumstances and information
   1. On the first page you’ll be asked if you wish to sign-up to CIS for ‘net payments’ or ‘gross payments.’ We discuss the Gross Payments Scheme in greater detail below, but most sole traders just starting out will not yet qualify for this, so should choose ‘net payments’ instead.
4. Complete the CIS registration form and wait for confirmation from HMRC

You’re now almost finished registering as a CIS subcontractor, but there’s one last important thing to do.

• When a contractor hires you, they will need to verify you as being CIS-registered online, through their own CIS-registered HMRC account. This way they’ll only take 20% from your pay, and not 30%. The final step in registering as a CIS subcontractor is to give your contractor your UTR and NI numbers (if you’re self-employed) or your UTR number and company name (if operating as a company).

What is the Gross Payments Scheme?

There is one other, different way you can register for CIS as a subcontractor. Under the normal ‘net payments’ way, your contractor(s) deduct 20% of your pay as tax for HMRC each month.

However, if you register for ‘gross payments’ CIS, then they don’t deduct anything at all.

Instead, it’s up to you to put aside your tax and pay it in one go during your Self Assessment Tax Return at the end of the financial year.

You can only sign up to the Gross Payments Scheme if, without counting VAT or cost of materials, your annual turnover exceeds £30,000. If you’re part of a partnership or subcontracting company, then the total turnover must exceed £30,000 per person.

The Gross Payments Scheme doesn’t work for everyone, even if you’re earning over the threshold. Some people simply prefer to stay on top of their tax by paying by ‘net’, or monthly. However, if as a subcontractor you’ve got other subcontractors working for you, the Gross Payments scheme can help with cashflow by not deducting anything month-on-month.

Conclusion: How to get help with CIS and your Self Assessment Tax Return

By following our guide to registering as a CIS subcontractor, hopefully you’re now confident to sign up to the Construction Industry Scheme and start putting money toward your tax bill each month.

Of course, at UWM Accountants we understand that tax can be confusing and stressful if you don’t have the time or experience to deal with it, especially when you’re self-employed. To find out how a personal accountant could benefit you, or for more help registering for CIS as a subcontractor, get in touch today.