Contractor checklist: decide whether CIS applies, check employment status, register where required, verify new subcontractors, apply HMRC's deduction rate, issue statements, submit monthly returns and pay deductions to HMRC.
Who is a CIS contractor?
Construction businesses paying subcontractors are commonly contractors under CIS. Some non-construction businesses can also become deemed contractors where their construction expenditure meets the statutory test.
Check employment status first
CIS does not turn an employee into a subcontractor. Before using CIS, the working relationship should support self-employed status.
Verify subcontractors
HMRC verification tells the contractor whether to pay the subcontractor gross or deduct at the appropriate rate. Using the correct legal name and UTR is important.
Calculate deductions correctly
Start from the invoice and identify the amount subject to CIS. VAT and qualifying materials paid directly by the subcontractor are not normally part of the deduction base.
Monthly returns and statements
Contractors must report payments and deductions to HMRC and provide subcontractors with payment and deduction statements. A reliable monthly process avoids missing returns and makes year-end queries easier to resolve.
CIS and VAT DRC are separate
Many contractor payments also need a VAT domestic reverse charge check. Do not assume the CIS deduction treatment automatically tells you the VAT treatment.
Frequently asked questions
Do I verify every subcontractor every month?
Verification is generally needed for new subcontractors and in certain circumstances; keep records of the verification details HMRC provides.
What if a subcontractor is not registered?
HMRC may instruct the contractor to deduct at the higher 30% rate.
Does gross payment status mean CIS does not apply?
No. The subcontractor remains within CIS; gross status means the contractor pays without making a CIS deduction.