Guide

CIS for subcontractors

Under the Construction Industry Scheme (CIS), a contractor who pays you for construction work takes a deduction from the payment and passes it to HMRC. The deduction counts as an advance payment towards your tax and National Insurance, so you claim it back when you report your tax. This guide covers registering, the rates, what is not deducted, your monthly statements, getting the money back and gross payment status.

Last checked 3 November 2026 against GOV.UK: HMRC's subcontractor guide, the CIS 340 guide and HMRC's policy paper on the changes from 6 April 2026. This is general information, not tax advice.

Registering for CIS

Register if you work for a contractor and you are a sole trader, the owner of a limited company, or a partner in a partnership or trust. If you are an employee, you do not register. If you also pay other subcontractors for construction work, you register as both a subcontractor and a contractor. Subcontractors based abroad who do construction work in the UK register too.

To register you need:

• your legal business name, and your trading name if it is different;
• the Unique Taxpayer Reference (UTR) for your business;
• your VAT registration number, if you are VAT registered;
• the date you started trading.

Depending on your business, HMRC may also ask for your National Insurance number, your Company Registration Number, the registering partner's UTR and National Insurance number, or a Joint Venture Agreement.

The quickest way is HMRC's online service, which needs a UTR and registers you for "net payment status" (paid with deductions). If you do not have a UTR yet, register as a new business for Self Assessment and choose "working as a subcontractor" when asked: that registers you for Self Assessment and CIS at the same time. There are postal forms if you cannot register online. Giving false information can lead to a fine, for you and for anyone who helps you.

Verification and the 20% and 30% rates

When you start working for a contractor, give them your UTR and your legal business or trading name exactly as you gave them when you registered. The contractor uses these to verify you with HMRC. To verify a sole trader, the contractor also gives HMRC your National Insurance number; for a company, its Company Registration Number. HMRC then tells the contractor which rate to use:

• 20% (the standard rate) if you are registered for CIS and the contractor can verify you;
• 30% (the higher rate) if you are not registered, or HMRC cannot verify your details;
• no deduction if you have gross payment status.

If you are paid at 30%, your statement shows a verification reference number ending in one or two letters. Keep it: you need it to claim credit for those deductions. A contractor who included you on a monthly return in the current or the 2 previous tax years does not have to verify you again, and pays you the same way as last time until HMRC says otherwise.

What is not deducted

The deduction is taken only from the labour part of your invoice. The contractor does not deduct from:

• VAT;
• materials you paid for directly;
• consumable stores (equipment used up on the job);
• fuel used for the work, but not fuel for travelling;
• plant you hired for the job from someone else;
• the cost of manufacturing or prefabricating materials.

Travel expenses, including fuel for travelling, and subsistence paid to you are part of the amount the deduction is taken from. Nothing is taken off for plant you own, although the fuel it uses still counts as materials. Keep your receipts: the contractor may ask for evidence of what the materials cost, and estimates it if you have none.

A worked example

You are registered for CIS and for VAT, and the domestic reverse charge does not apply to this job. You invoice £1,000 of labour and £400 of materials you bought, plus £280 of VAT at 20%, so the invoice total is £1,680. The contractor deducts 20% of the £1,000 labour, which is £200, and pays you £1,480. The invoice generator works this out for you, and its CIS section shows the same job without VAT and with the reverse charge.

Your monthly payment and deduction statements

Each contractor that takes a deduction must give you a statement within 14 days of the end of each tax month. A tax month runs from the 6th of one month to the 5th of the next, so the statement is due by the 19th. It can be sent electronically if you both agree and it comes in a form you can store and print. It shows:

• the contractor's name and employer tax reference;
• the tax month it covers, or the payment date for a single payment;
• your name and UTR, and your verification number if you were paid at 30%;
• the gross amount paid, the cost of materials taken off before the deduction, and the deduction.

If the figures look wrong, speak to the contractor. Keep every statement, because HMRC may ask for evidence of your deductions. If you lose one, ask the contractor for a replacement. If you cannot get your statements, for example because the contractor has gone out of business, write to HMRC with your name, address and UTR, the contractor's name and address, the contractor's tax reference if you know it, the dates of the payments or the tax months you were paid in, and why you do not have the statements. The address is PT Operations, HM Revenue and Customs, BX9 1BX.

Claiming your deductions back

Sole traders and partners

At the end of the tax year, send your Self Assessment return as usual. Record your total pay before deductions as income, and the total the contractors deducted as "CIS deductions". Both go on the self-employment pages (SA103S or SA103F), or the partnership pages for a partner, never on the employment page (SA102). HMRC works out your tax and takes the deductions off it. If you still owe tax, pay it by 31 January after the end of the tax year. If the deductions came to more than your bill, HMRC repays the difference.

If you stop trading, you may be able to claim back deductions from the current tax year straight away, with form CIS40 for a sole trader or CIS41 for a partner.

Limited companies

A company uses its CIS deductions through its payroll. Send your Full Payment Submission (FPS) as usual and, at the same time, an Employer Payment Summary (EPS) with the total CIS deductions for the year to date. HMRC takes them off what the company owes in PAYE tax, National Insurance, Student Loan repayments and any CIS deductions it made from its own subcontractors, and you pay the balance by the usual date. If deductions are left over, carry them forward within the same tax year and tell HMRC on the EPS that you have nothing to pay.

After the tax year ends, claim the rest back. HMRC first uses it to pay any overdue PAYE or Corporation Tax; you can then have what is left refunded or put towards VAT or upcoming Corporation Tax. You can claim online for the past 6 tax years. Do not use the Corporation Tax return to claim the deductions; HMRC may charge a penalty if you do. Keep the statements and a record of the deductions set against each PAYE bill (form CIS132 is one way). If HMRC asks for evidence of a claim and does not get it by its deadline, it corrects the claim itself and you cannot make further claims that tax year, though you can appeal.

Gross payment status

With gross payment status, contractors pay you in full and you pay all your tax and National Insurance at the end of the tax year. You declare the payments as income on your Self Assessment return as a sole trader or partner, or on the company's Corporation Tax return. To get it, your business must pass three tests.

• Business test: the business does construction work, or provides labour for it, in the UK, and is run through a bank account.
• Compliance test: you have paid your tax and National Insurance on time in the past. Since 6 April 2024, HMRC also counts your VAT returns and payments, leaving out minor failures.
• Turnover test: over the last 12 months, leaving out VAT and the cost of materials, your turnover is at least the figure below.

Apply online or by post, using the form for a sole trader, a partnership or a limited company. Applying also registers you for CIS if you are not registered yet.

The annual review

HMRC reviews every business with gross payment status each year to decide whether it keeps the status. You must be on time with your tax returns and payments; a small number of late returns or payments is allowed. For a limited company, HMRC reviews the company itself, not its directors or shareholders. If you cannot pay on time, contact HMRC: if it gives you more time to pay, your status is not affected.

If you are about to fail, HMRC writes to say so and why, and you can write back with your reasons. If HMRC accepts them, you keep the status. If you do not reply, or HMRC does not accept your explanation, it writes again to say which conditions you have not met and that it is withdrawing the status in 90 days. You have 30 days from the date of that letter to appeal. HMRC also tells the contractors who used you in the current or 2 previous tax years, and they start making deductions after the date it gives them.

After a cancellation, you must wait a year from the date of the cancellation before you can apply again. A cancellation with immediate effect has a longer wait, below.

Changes from 6 April 2026

HMRC can also cancel gross payment status with immediate effect. From 6 April 2026, the grounds include a business that knew or should have known that payments it made or received were connected with the fraudulent evasion of tax. The other grounds are false information given when registering for gross payment status, fraudulently making an incorrect return or giving incorrect information, and knowingly failing to meet a CIS obligation.

• After an immediate cancellation, the wait before you can reapply is now 5 years instead of 1.
• A business that knew or should have known of the fraud can be made liable for the lost tax.
• HMRC can charge a penalty of up to 30% of the lost tax to the business, and also to its directors and other people connected with it.

HMRC says these measures should not affect compliant businesses that check who they contract with. GOV.UK's subcontractor guide still gives a one-year wait for any cancellation; the longer wait after an immediate cancellation comes from HMRC's policy paper on the change.

Changes you must tell HMRC about

Call the CIS helpline if your business changes shape: from sole trader to partnership, from a partnership or company to a sole trader, or into a company. You usually have to register for CIS again, because a registration cannot move from one business structure to another, and apply again for gross payment status if you had it. Also tell HMRC if you change your trading name or your business, private or registered office address, or stop trading. If a company with gross payment status adds new shareholders, tell HMRC within 30 days, or it may withdraw the status.

Sources

• What you must do as a CIS subcontractor, GOV.UK: registering, getting paid, statements, claiming back, gross payment status, the annual review and changes to report.
• Construction Industry Scheme: CIS 340, GOV.UK (updated 27 August 2026): sections 1.10, 1.11, 3.2 and 3.6 to 3.15.
• Construction Industry Scheme: tackling fraud, HMRC policy paper, 26 November 2025: the changes from 6 April 2026.
• Construction Industry Scheme reform from 6 April 2024, HMRC policy paper: VAT in the compliance test.
• Claim a refund of CIS deductions as a limited company, GOV.UK.