Do I Need to Register for CIS? Contractor and Subcontractor Rules

If you’re moving money through construction work, one or other side of the Construction Industry Scheme applies to you, and the two roles have very different registration rules. Here’s what HMRC’s own pages say about who counts as what, who actually has to register, and what registering (or not) does to your pay.

Contractor or subcontractor: which one are you?

Under CIS, a contractor deducts money from a subcontractor’s payments and passes it to HMRC as an advance against that subcontractor’s own tax and National Insurance [1]. You’re a subcontractor if you do construction work for a contractor [1]. You’re a contractor if you pay subcontractors for construction work, or if your business has spent more than £3 million on construction in the 12 months since your first payment [1]. That second test catches businesses that aren’t builders at all — a retailer or a school with a big enough construction spend still has to register as a contractor even though construction isn’t what they do [1].

It’s also possible to be both at once. A jobbing builder who takes on subcontractors of their own, while also working under a main contractor on other sites, has to register for CIS in both roles [5].

Contractors: registration isn’t optional

If you pay subcontractors for construction work, you must register as a contractor before you take on your first subcontractor [2]. There’s no lower threshold and no grace period built into that rule — the requirement to register sits alongside your other contractor duties, which include verifying every subcontractor with HMRC, deducting the right amount from their payments, and filing a monthly return [2]. Registering as a contractor means following the process for setting up as a new employer; HMRC then sends back the details you need to operate CIS, including your employer PAYE reference number [3]. Support for the process comes through the New Employer Helpline, the CIS helpline, and HMRC’s own CIS online service [3].

Subcontractors: registration is optional, but expensive to skip

Unlike contractors, subcontractors are not required to register for CIS [4]. Nothing forces you to. But staying unregistered has a direct cost built into every payment you receive: a contractor must deduct 20% from a registered subcontractor’s payments, against 30% from an unregistered one [4]. That’s not a one-off fee, it’s a rate applied to every invoice, for as long as you stay off the register.

To register as a subcontractor, you need your legal business name (and trading name, if different), your Unique Taxpayer Reference (UTR), your VAT registration number if you have one, and the date you started trading [5]. What else is needed depends on how you’re set up: sole traders may also need to give a National Insurance number, partnerships need the registering partner’s UTR and National Insurance number, and limited companies need their Company Registration Number [5]. The fastest route is online, using a Government Gateway account and your UTR, which registers you for “net payment status” (payment under the standard deduction) [5]. If you don’t yet have a UTR, you register for Self Assessment as a subcontractor first, then register for CIS on top of that [5]. Postal forms exist as an alternative for sole traders, partnerships and limited companies if you’d rather not register online [5].

Gross payment status: the third option

There’s a step beyond standard registration. If you apply for and get gross payment status, a contractor pays you in full with no CIS deduction at all, and you settle your tax and National Insurance yourself at year end [6]. Applying for gross payment status also registers you for CIS, so it covers both steps in one application [4]. To qualify, HMRC needs to see that you’ve paid your tax and National Insurance on time in the past, that your work is construction work (or supplying labour for it) carried out in the UK, and that the business runs through a bank account [6]. There’s also a turnover test, based on turnover excluding VAT and the cost of materials: £30,000 for a sole trader, and for partnerships or limited companies either £30,000 per partner or director or £100,000 for the business as a whole [6].

What actually changes at each stage

Put side by side, the practical difference between the three states is the percentage taken off every payment before it reaches your account.

Status	Deduction rate	Registration required?
Unregistered subcontractor	30% [4]	No, but costs the most
Registered subcontractor (net payment)	20% [4]	Optional, applied for directly [5]
Gross payment status	0% [6]	Optional, applied for and registers you automatically [4]
Contractor	N/A (you deduct, not receive)	Mandatory before your first subcontractor payment [2]

A subcontractor who never registers isn’t breaking a rule, but they’re paying a 10-percentage-point premium on every invoice, indefinitely, compared with simply registering [4]. A contractor who never registers is a different problem entirely: the registration duty is mandatory, and it sits alongside verification and monthly filing obligations that carry their own penalties for getting wrong [2].

What to do next

Working out which side of CIS you’re on, and whether registering or applying for gross payment status makes sense for your turnover, is worth getting right before it costs you a run of invoices at the higher rate. Loomwork Ai’s compliance audit checks your current CIS status against what HMRC’s own rules actually require.