You may need to register as a contractor or a subcontractor or both, let’s look at what you need to do.
Registering as a Contractor
If you are within the Construction Industry and you pay Subcontractors, you will be a Contractor.
What are Mainstream contractors
If your business is construction and you pay subcontractors for construction work, you’re a ‘mainstream’ contractor. This applies if you’re a:
- labour agency
- gangmaster (or gang leader)
- property developer
What are Deemed contractors
You count as a ‘deemed’ contractor if your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment. This could apply to:
- housing association or arm’s length management organisations (ALMOs)
- local authorities
- government departments
How do you Register
You register as an employer but tick the box to say you will be paying subcontractors (you can also register by phoning the HMRC Helpline 0300 200 3210), I generally use the gateway.
It can take 5 working days to register (longer at the moment), you can’t register more than 2 months in advance and you need to register before you make payments.
You register on Government Gateway, its registering for taxes, you need to choose PAYE.
You then need to know:
- Business UTR
- Business Contact Details
- Your NI Number
- Start date
- Tick the Subcontractor Box
When done, you’ll get a letter from HM Revenue and Customs (HMRC) with the information you need to start working as a Construction Industry Scheme (CIS) contractor.
Contractors need to:
- Verify Subcontractors – checking deduction status
- Deduct tax from payment at the rate stated by HMRC
- Pay tax to HMRC
- Complete a Monthly CIS return
- Provide Subcontractors with a Deduction Statement
Registering as a Subcontractor
To register for the Construction Industry Scheme (CIS) as a subcontractor you’ll need:
- your legal business name – you can also give a trading name if it’s different to your business name
- your National Insurance Number
- the unique taxpayer reference number (UTR) for your business
- your VAT registration number (if you’re VAT registered)
If you’re a subcontractor and a CIS contractor (you pay subcontractors to do construction work), you’ll need to register for CIS as both.
You can register by phoning the HMRC Helpline
0300 200 3210
Monday to Friday: 8am to 6pm
Closed on weekends and bank holidays.
You can also register using the goevrnment gateway – register for CIS online. You’ll need the Government Gateway user ID and password you used when you registered for Self Assessment (or another government service).
You can apply for gross payment status at the same time.
If you do not have a UTR, register as a new business for Self Assessment and choose ‘working as a subcontractor’ when prompted. You’ll be registered for Self Assessment and CIS at the same time.
Companies can use form CIS305 to apply.
How do you qualify for Gross Status
You must show HM Revenue and Customs (HMRC) that your business passes some tests. You’ll need to show that:
- you’ve paid your tax and National Insurance on time in the past
- your business does construction work (or provides labour for it) in the UK
- your business is run through a bank account
HMRC will look at your turnover for the last 12 months. Ignoring VAT and the cost of materials, your turnover must be at least:
- £30,000 if you’re a sole trader
- £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership
- £30,000 for each director of a company, or at least £100,000 for the whole company
If your company’s controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.
Gross Status means you can be paid without any tax being deducted.