You are a contractor when you engage sub contractors to carry out construction work,
or if you run a business which spends £1million or more per year on construction
work over a 3 year period. Any type of business can be a CIS Contractor but a private
householder can never be, no matter how much they spend on construction work.
You are a CIS sub contractor if you agree to do construction work for a Contractor
(assuming you are not an employee). Any type of business can be a sub contractor.
Sub contractor or employee
The CIS Scheme only applies to construction workers that are self employed or are
a business. If you have a contract of employment then your tax will be paid through
the PAYE scheme.
(Determining whether someone is an employee or self-employed is a whole different
subject, you will find some guidelines on this here).
Both a Contractor and a Sub contractor
You may be a contractor and a sub contractor at the same time. For example if you
accept construction work from a company then you are their subcontractor. You then
arrange for another company or self-employed workers to help you carry out this work,
then you are a Contractor to the other business/self-employed and they are your sub
How to apply the CIS Scheme - Contractors
As a Contractor the first thing you have to do is Register as an Employer with HMRC,
letting them know that you are going to be engaging construction industry sub contractors,
(if you have not already done so).
You will then have to decide whether the workers are indeed sub contractors or employees,
this will depend on the type of contract they have with you.
If you have not used a particular sub contractor previously then you will need to
verify that they are registered with HMRC as a sub contractor. You can do this by
calling the HMRC helpline or online at HMRC website. You will need to supply the
the name of your business or organisation
your unique taxpayer reference (UTR)
your Accounts Office reference
your employer reference
You'll also need the following information about the sub contractor:
their name, or the name of their business or company
the partner's name if they're a partnership
their National Insurance number (if you know it) if they're a sole trader
the partner's UTR or National Insurance number if they're a partnership (or, if the
partner's a company, that company's UTR or company registration number)
their company registration number if they're a company
Finally, you'll need to be able to confirm that you've agreed a contract with the
subcontractor, or that you've formally accepted their contract tender.