There are two separate CIS registrations, they use completely different processes, and a lot of construction businesses need both.
Contractor registration is compulsory. Subcontractor registration is optional but costs you 10% of every labour payment if you skip it. Here is which one you need and how each works.
Which registration do you need?
| Register as a contractor | Register as a subcontractor | |
|---|---|---|
| When | You pay subcontractors for construction work, or your business does not do construction work but you have spent more than £3 million on construction in the 12 months since your first payment | You do construction work for a contractor |
| Compulsory? | Yes | No — but deductions are 30% instead of 20% if you do not |
| How | Through the “register as a new employer” process | Online, or by post |
| What you get | An employer PAYE reference and a PAYE/CIS scheme | Net payment status, also called payment under deduction |
| Deadline | Before you take on your first subcontractor | Before your first payment, in practice |
If you fall under both categories, you must register as both. A subcontractor who also pays their own subcontractors is a contractor as well, and both sets of obligations run simultaneously.
You do not need to register for CIS if you are an employee. Check your employment status if you are not sure.
Registering as a contractor
Contractor registration is not a standalone CIS form. You follow the process for setting up as a new employer.
HMRC then writes to you with what you need to start operating as a CIS contractor, including your employer PAYE reference number. You can check current processing times on GOV.UK before you assume something has gone wrong.
If you already have employees, HMRC converts your existing PAYE scheme into a combined PAYE/CIS scheme. You then make one payment each month or quarter covering PAYE tax, National Insurance and CIS deductions together.
If your business is based outside the UK but you do construction work here, there is a different registration route.
Register before you take on your first subcontractor. This is a rule, not a suggestion, and it matters because you cannot verify a subcontractor without the references that registration produces.
Registering as a subcontractor
The quickest route is online, and it registers you for net payment status — 20% deductions.
You need a Unique Taxpayer Reference to use the online service. If you do not have one, register as a new business for Self Assessment and choose “working as a subcontractor” when prompted. That registers you for Self Assessment and CIS at the same time, which saves a step.
What you need to hand:
- your legal business name, plus a trading name if different
- the UTR for your business
- your VAT registration number, if VAT registered
- the date you started trading
Depending on your circumstances you may also need your National Insurance number, Company Registration Number, the registering partner’s details including their UTR and National Insurance number, or a Joint Venture Agreement.
If you cannot register online there are postal forms for sole traders, partnerships and limited companies. Subcontractors based abroad who do construction work in the UK should still register.
If you want to be paid without deductions at all, apply for gross payment status instead — that application also registers you for CIS if you have not already registered.
Verifying subcontractors
Registration is only the beginning. Before you can pay a new subcontractor, you must verify them with HMRC. HMRC tells you whether they are registered and what rate of deduction to use.
You must also verify a subcontractor you have used before if you have not included them on a CIS return in the current or last two tax years. That rule catches people who use the same firm seasonally.
To verify, you need:
| Yours | Theirs |
|---|---|
| Your Unique Taxpayer Reference | Their UTR |
| Your HMRC accounts office reference number | National Insurance number if a sole trader — temporary numbers starting ‘TN’ or two digits cannot be verified |
| Your HMRC employer reference | Company name, company UTR and registration number if a limited company |
| Nominated partner details, trading name and partnership UTR if a partnership |
The details you give must exactly match the details the subcontractor used to register with HMRC. A trading name where HMRC holds a legal name, or an initial instead of a full first name, produces a “not verified” result and a 30% deduction on a subcontractor who is properly registered. Ask for the exact registered details in writing.
You can verify through HMRC’s free CIS online service or commercial CIS software. More than 50 subcontractors and you must use commercial software.
What not registering actually costs
An unregistered subcontractor is deducted at 30% instead of 20%. On a £10,000 labour invoice:
| Registered (20%) | Unregistered (30%) | |
|---|---|---|
| Gross labour invoice | £10,000 | £10,000 |
| CIS deduction | £2,000 | £3,000 |
| Paid to the subcontractor | £8,000 | £7,000 |
| Held by HMRC | £2,000 | £3,000 |
The extra £1,000 is not lost. It is still an advance payment towards the same tax bill and it comes back through Self Assessment or, for a limited company, through the payroll offset. But it sits with HMRC for up to a year, and for a small subcontractor that is a serious cash flow problem — 10% of every labour invoice, permanently in transit.
Registering takes minutes. There is no reason to run at 30%.
Giving false information
You could be fined if you provide false information when registering, and so could anyone who helps you make a false registration. That applies to both contractor and subcontractor registration, and to gross payment status applications.
After you register
Contractors then have a monthly cycle: verify, deduct, issue a payment and deduction statement within 14 days of the end of each tax month, pay HMRC by the 22nd (19th if paying by post), and file the monthly return by the 19th of every month following the last tax month.
You also have to tell HMRC about changes to your business — a change of address, a change of trading status, a partner joining or leaving, or the company being taken over.
Frequently asked questions
Do I register for CIS as a contractor or a subcontractor?
Register as a contractor if you pay subcontractors for construction work, or if your business does not do construction work but you have spent more than £3 million on construction in the 12 months since your first payment. Register as a subcontractor if you do construction work for a contractor. If both apply, you must register as both.
How do I register as a CIS contractor?
You follow the process for setting up as a new employer. HMRC then sends you a letter with the information you need to start, including your employer PAYE reference number. If you already have employees, HMRC changes your existing PAYE scheme into a combined PAYE/CIS scheme.
Can I register for CIS without a UTR?
Not directly. To register as a subcontractor online you need a Unique Taxpayer Reference. If you do not have one, register as a new business for Self Assessment and choose “working as a subcontractor” when prompted — that registers you for Self Assessment and CIS at the same time.
What happens if I do not register for CIS as a subcontractor?
Contractors must deduct 30% from your payments instead of 20%. The extra is not lost — it still counts as an advance payment towards your tax and National Insurance — but it sits with HMRC until you reclaim it, which can be up to a year later.
When do I need to verify a subcontractor?
Before you pay a new subcontractor for the first time, and again for any subcontractor you have used before but have not included on a CIS return in the current or last two tax years. If you need to verify more than 50 subcontractors you must use commercial CIS software.
Getting the scheme set up correctly
CIS registration and PAYE registration are the same process, which means getting the payroll side right at the same time saves doing it twice.
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