Construction Industry Scheme

04 Jul 2024

How to Register for CIS

CIS compliance is essential for all construction companies and businesses in order to stay on the right side of HMRC.

While tax plays a big role in the accounts of every type of company, for construction businesses there is a specific scheme known as the Construction Industry Scheme that handles the payment of contractors and subcontractors.

If a company does not correctly comply with the scheme then its payroll may be audited which could result in a reclassification by HMRC - which is extremely damaging and financially costly.

So, to ensure this does not happen to your business, and to keep contractors and subcontractors protected, it’s important that you properly register for CIS.

In this article, the expert team here at Contractwise will explain how you can do exactly that, guiding you through the process and outlining everything you need to do.

Read on to find out more.

What is the Construction Industry Scheme?

The Construction Industry Scheme is the main way that tax is paid and dealt with across the construction sector.

Everyone who works within the industry should be familiar with the scheme and how it works, so before we explain the specifics of registering for the scheme we’ll first take a look at what it actually is.

Originally created in 1971, the main purpose behind the Construction Industry Scheme is to make the taxation process easier and to minimise illegal tax evasion. Historically, tax has been seen as easier to avoid in the world of construction and payments to contractors and subcontractors were deemed to be not as transparent as they should be.

Step in the Construction Industry Scheme.

Since the 1970s it has remained largely the same other than some changes made in 2007. However, its main purpose of making taxes easier in the construction industry has never wavered.

The Construction Industry Scheme is mandatory for contractors, and they need to register by law. It’s optional for subcontractors but it is advantageous to do so as we’ll explain.

Once a construction project has been completed, contractors will pay any subcontractors through the scheme as opposed to traditional payroll methods. Registered subcontractors will then automatically have 20% of their earnings deducted in the form of tax. This simply means that subcontractors do not have to worry about paying their taxes at a later date as it has already been taken care of on their behalf by the scheme.

However, as mentioned above, unlike contractors subcontractors do not have to register for the scheme if they do not want to. But, for subcontractors who opt not to do so, 30% of their earnings will be deducted instead of 20%.

With this in mind, it is easy to see why it is worthwhile registering for the scheme as subcontractors save themselves 10% by doing so. If they prefer, subcontractors can apply for gross pay which simply means no money will be deducted from their pay packet and they can file their taxes like other self-employed individuals and pay a lump sum at a later date.

However, this is assessed on a case-by-case basis and not everyone may be eligible.

Who Is A Contractor and Subcontractor?

One of the most important elements of the CIS system is understanding who is categorised as a contractor and who is a subcontractor.

If you get these definitions wrong, then you could find yourself in legal difficulty or HMRC may reclassify people for you which can be extremely costly.

A contractor is defined as a professional who pays subcontractors to carry out specific construction tasks.

It is a legal requirement for all contractors to be registered with CIS, so if you are the owner or manager of a construction business that pays any subcontractors then you must register. In addition to this, even if the business you work for is not a construction one but it has spent more than £3million on construction work in the last 12 months, it needs to be registered with CIS.

In contrast, a subcontractor is paid by the contractor to carry out the work.

Usually, a subcontractor will be someone who is a specialist in a certain area and will bring their expertise to a project.

Some common examples of subcontractors include:

  • Electricians

  • Plumbers

  • Groundworkers

  • Engineers

  • Plasterers

  • Stonemasons

  • Carpenters

  • And much more

It’s essential to know the difference between a contractor and a subcontractor, but it is perhaps even more important to distinguish between subcontractors and employees. Employees are your permanent staff members who work for you and who you pay on a regular basis (usually monthly). In contrast, you only pay subcontractors when you have acquired their services for a specific task.

If you incorrectly classify an employee as a subcontractor, HMRC will reclassify them and you will be hit with a hefty fine.

How To Register For CIS

Now we’ve outlined exactly what the Construction Industry Scheme is, let’s now turn our attention to how to register for it.

As previously mentioned, it is mandatory for contractors to register for the scheme whereas for subcontractors it is a choice.

However, at Contractwise, we’d always recommend registering to ensure you don’t miss out on any pay.

You can register online, over the phone or by post and in the sections below we’ll guide you through the process for both contractors and subcontractors.

What Do You Need To Register?

Before you begin the registration process, you need to make sure you have:

  • Your legal business name (you can also provide your trading name if it differs from the legal name)

  • You or your business’ Unique Taxpayer Reference number (UTR)

  • The date you started trading

  • Your National Insurance Number

  • Your company’s registration number

  • Any registering partner details, including UTR and national insurance numbers (if applicable)

  • A Joint Venture Agreement (if applicable)

If you work as both a contractor and a subcontractor, then you’ll need to make separate CIS registrations for both roles.

And if you’re registering online, you’ll also need a Government Gateway ID and password.

CIS Subcontractor Registration

The process of registering slightly differs for contractors and subcontractors.

Let’s begin by looking at the process for subcontractors.

If you don’t register for the scheme, then you will have 30% of your earnings automatically deducted so it is certainly worth doing.

The main way to do this is by going online.

Head to the Government Gateway website and complete the process. It is quick and easy and all you will need to have to hand is the list outlined above.

The most important thing is your UTR, or the businesses if you’re registering as a company. You’ll also be likely asked for personal details such as your national insurance number.

An alternative option to online is to call HMRC by using the CIS helpline. This dedicated helpline will be able to guide you through the process step by step. You can also register via post by downloading the relevant forms from the government website and posting them directly to the scheme.

Once you’ve registered, if you are hired by a contractor to carry out the work you will need to provide them with your UTR and national insurance number. The contractor will then go online to verify your CIS status.

Then, 20% of your pay will automatically deducted and when you complete future tax return forms you will be credited for tax that has been already taken. This will be in the form of income tax, corporation tax or deducted from PAYE/NI payments.

If you prefer, you can also apply for the gross payments scheme. The process is much the same as the traditional CIS system, and going online is the easiest way to do this.

By applying for this, it means you will not have any deductions and you will pay for your tax like other self-employed individuals.

This can be beneficial for those looking for better cash flow solutions.

CIS Contractor Registration

If you’re a contractor, there are two main ways to register for CIS.

Firstly, when you’ve registered for PAYE, there is a box that asks ‘will you be engaging any subcontractors in the construction industry?’ all you need to do is tick the box and you’ll be automatically CIS registered.

If you have previously registered for PAYE but not clicked that box, then you’ll need to get in touch and let CIS know that you have a PAYE number and now need to register as a contractor. Calling the CIS helpline may be the best option in this situation.

However, if you’ve started life as a subcontractor and are transitioning into being a contractor then the process is a bit different.

You’ll already have a UTR number to hand and a Government Gateway account, and the first thing to do is to log in. From here, you need to register as an employer. Even if you don’t employ anyone directly and only plan on using subcontractors, this part of the process is still necessary.

You will then receive a PAYE number.

Once you have the number, you can then officially register as a CIS contractor by following the Government Gateway steps.

The process of registering for CIS can be confusing and time-consuming. To guarantee you’re CIS compliant and to allow you to focus on your construction work, the best option is to outsource the process to CIS experts such as Contractwise. We help companies across the construction industry remain CIS compliant while always putting their needs first. To find out more, contact our team today.