Registering for the Construction Industry Scheme and How It Affects Your Taxes

Sehrish Khan
Mar 27, 2025
4 min read

The Construction Industry Scheme (CIS) is a tax scheme in the UK that applies to contractors and subcontractors in the construction sector. Under the scheme, contractors must deduct tax from subcontractor payments and pass it on to HM Revenue & Customs (HMRC). This ensures that subcontractors pay the correct amount of tax and National Insurance contributions.

If you work in construction, it’s essential to register for the Construction Industry Scheme to avoid penalties and ensure smooth operations. In this guide, we’ll cover everything you need to know about CIS, including who needs to register, how to do it, and the benefits of being part of the scheme.

1. What is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme is a tax deduction program designed by HMRC to regulate tax payments in the construction sector. Under this scheme:

Contractors must deduct money from subcontractor payments and send it to HMRC.
The deductions count as advance tax payments for subcontractors.
Both contractors and subcontractors need to follow the scheme’s regulations to avoid penalties.

HMRC introduced the scheme to prevent tax evasion and ensure that workers in the construction sector pay the right amount of tax on their earnings.

2. Who Needs to Register for the Construction Industry Scheme?

Not everyone in the construction sector is required to register, but it applies to:

Contractors

You are considered a contractor under CIS if you:

Pay subcontractors to carry out construction work.
Spend over £3 million on construction work in 12 months (even if construction isn’t your main business).

If you fall into these categories, you must register for the Construction Industry Scheme before hiring subcontractors.

Subcontractors

You are a subcontractor if you:

Carry out construction work for a contractor.

Subcontractors can choose whether or not to register. However, if you don’t register, contractors will deduct 30% tax from your payments instead of 20%. Registering allows you to receive lower tax deductions.

Businesses That Are Both Contractors and Subcontractors

Some businesses operate as both contractors and subcontractors. In this case, you must register as both.

3. How to Register for the Construction Industry Scheme

The registration process for CIS depends on whether you are a contractor or a subcontractor.

How to Register as a Contractor

If you are a contractor, you must:

Set up as an employer – Even if you don’t have employees, HMRC requires you to register as an employer for CIS.
Register for CIS online – You can do this through the HMRC website. You’ll need:
- Your business name and type (sole trader, partnership, or company).
- Your Unique Taxpayer Reference (UTR).
- Your National Insurance number (for sole traders).
Verify subcontractors – Once registered, you must verify subcontractors with HMRC before paying them. This ensures they are registered and confirms the tax deduction rate.
Make deductions and report to HMRC – You must deduct tax from subcontractor payments, submit monthly returns to HMRC, and keep accurate records.

How to Register as a Subcontractor

If you are a subcontractor, you can register:

Online through HMRC – The fastest way to register is via the HMRC website.
By calling HMRC’s CIS helpline – If you prefer, you can register by phone.
Through an accountant or tax advisor – Many businesses use professionals to handle CIS registration and tax compliance.

To register, you’ll need:

Your UTR (if you’re a sole trader) or company details (if you’re a limited company).
Your National Insurance number (for individuals).

After registering, contractors will deduct 20% tax from your payments instead of 30%. If you qualify for gross payment status, you won’t have any deductions, but you must prove you meet certain financial requirements.

4. CIS Deductions and Payments

Tax Deduction Rates

Once you register for the Construction Industry Scheme, contractors deduct tax from your payments at one of the following rates:

20% if you’re registered.
30% if you’re not registered.
0% (gross payment status) if you meet specific criteria and HMRC approves your application.

Making Payments to HMRC

Contractors must:

Deduct the correct amount from subcontractors.
Pay HMRC by the 22nd of each month (or the 19th if paying by post).
Submit a CIS return monthly, detailing payments and deductions.

5. Benefits of Registering for CIS

There are several advantages to registering for CIS:

For Contractors

Avoid fines for non-compliance.
Keep proper records for tax purposes.
Ensure smooth payment processing with subcontractors.

For Subcontractors

Lower tax deductions (20% instead of 30%).
Easier tax returns, as some of your tax is already paid.
Potential eligibility for gross payment status.

Not registering can result in significant deductions, making it harder to manage cash flow.

6. Penalties for Non-Compliance

Failing to register for the Construction Industry Scheme or follow its rules can result in penalties. These include:

Late CIS returns – If you miss the monthly submission deadline, you’ll face fines starting at £100.
Incorrect deductions – If you deduct the wrong amount, HMRC may charge penalties and interest.
Failure to verify subcontractors – Contractors must verify subcontractors to ensure they apply the correct tax rate.

To avoid these issues, ensure you stay compliant with CIS rules.

7. Common Questions About CIS Registration

Can I Register for CIS If I’m Self-Employed?

Yes. Sole traders must register for the Construction Industry Scheme if they work as subcontractors. Contractors must also register if they hire other subcontractors.

What Happens If I Don’t Register?

If you don’t register, contractors will deduct 30% tax instead of 20%. This means you’ll take home less money, and you may need to claim a refund at the end of the tax year.

How Long Does CIS Registration Take?

It usually takes a few weeks. Once you apply, HMRC will send a confirmation letter with your CIS registration details.

Can I Deregister from CIS?

Yes. If you stop working as a contractor or subcontractor, you can notify HMRC and deregister.

8. Final Thoughts

If you work in construction as a contractor or subcontractor, it’s crucial to register for the Construction Industry Scheme to ensure tax compliance and avoid unnecessary deductions.

For contractors, CIS helps manage tax responsibilities and ensures subcontractors’ taxes are deducted correctly. For subcontractors, registering reduces tax deductions from 30% to 20%, improving cash flow.

By understanding the scheme’s requirements and staying compliant, you can operate smoothly in the construction sector while avoiding penalties. Whether you’re new to the industry or have been working in construction for years, following CIS rules will benefit your business in the long run.