There is no longer a physical CIS tax certificate to collect. Under the current Construction Industry Scheme, the phrase refers to a subcontractor’s verified registration status inside HMRC’s digital system, and that status decides how much tax a contractor withholds from every payment: 0% with gross payment status, 20% once you’re registered, and 30% if you aren’t.1GOV.UK. Make Deductions and Pay Subcontractors Getting registered is free, done online, and the difference between the 20% and 30% rates makes it worth doing before you invoice your first job.
What Your CIS Status Actually Determines
Every payment a contractor makes to a subcontractor for construction work has to be run through one of three deduction rates, and the rate is fixed by whatever HMRC’s records say about you on the day of verification.1GOV.UK. Make Deductions and Pay Subcontractors
- 0% — gross payment status. The contractor pays your invoice in full. You settle your tax at year end like any other business.
- 20% — registered for net payment. The standard rate for subcontractors registered with HMRC but not holding gross status.
- 30% — unregistered or unverifiable. Applied where a subcontractor hasn’t registered, or where the details a contractor submits don’t match HMRC’s records.
The deduction only bites on the labour portion of an invoice. Contractors pay the full amount for materials, consumable stores, fuel other than travel fuel, and plant hired from a third party, provided those costs are itemised separately.2HM Revenue & Customs. Construction Industry Scheme – A Guide for Contractors and Subcontractors CIS 340 If you own the plant rather than hire it, you can’t claim a notional hire cost — only consumables like fuel for that equipment qualify.
How to Register as a CIS Subcontractor
The fastest way to move from the 30% rate to the 20% rate is to register online through the Government Gateway. Registration costs nothing. To fill in the form you’ll need:3GOV.UK. What You Must Do as a Construction Industry Scheme CIS Subcontractor – How to Register
- Your Unique Taxpayer Reference (UTR), the 10-digit number issued when you registered as self-employed or set up a company
- Your National Insurance number, if you’re a sole trader
- Your company registration number, if you’re a limited company
- Your VAT number, if you’re VAT-registered
If you can’t register online, HMRC has paper forms tailored to your business structure. Sole traders registering for payment under deduction use form CIS301. Sole traders applying for gross payment status, or for both registration and gross status at the same time, use form CIS302. Partnerships use CIS304 and limited companies use CIS305.4HM Revenue and Customs. CIS – Individual Registration for Payment Under Deduction The wrong form gets rejected, so check before you post.
Have your bank details ready — HMRC uses them for any future refund — and if you’re going straight for gross payment status, have your last 12 months of construction turnover to hand.
Applying for Gross Payment Status
Gross payment status is where most established subcontractors want to land. Contractors pay you in full, and you sort your tax out yourself instead of chasing back over-deducted amounts. To qualify you have to pass two tests.
The Compliance Test
HMRC looks back over the 12 months before your application and checks that you’ve kept on top of every relevant tax obligation. That means Self Assessment returns filed, any CIS monthly returns filed if you also act as a contractor, VAT returns filed, and PAYE, National Insurance, VAT, and CIS deduction liabilities all paid on time.5HM Revenue and Customs. Individual Registration for Gross Payment Notes
There is some built-in tolerance. HMRC will overlook up to three late contractor monthly returns or VAT returns if each was no more than 28 days late, up to three late payments of £100 or more in PAYE, VAT, or CIS deductions if each was no more than 14 days late, and any late payment under £100. Late Self Assessment returns are disregarded if they were submitted within 28 days.5HM Revenue and Customs. Individual Registration for Gross Payment Notes A fourth slip inside the window tips you over.
The Turnover Test
You also have to show enough construction income. For sole traders, net construction turnover in the 12 months before the application must reach at least £30,000. Net construction turnover means gross income from construction work, less VAT and the cost of materials.5HM Revenue and Customs. Individual Registration for Gross Payment Notes
Companies have two routes: net construction turnover of at least £30,000 for each director (and each beneficial shareholder if the company is closely held), or a total net turnover of at least £100,000 across the company.6HM Revenue and Customs. CIS – Company Registration Guidance Notes If your sole trader construction turnover falls short but your total income from all sources exceeds the threshold, HMRC may still consider you eligible.
Giving false information on a gross payment application can lead to a penalty of up to £3,000 on top of the application being refused.5HM Revenue and Customs. Individual Registration for Gross Payment Notes
Keeping Your Status Once You Have It
Gross payment status isn’t awarded once and forgotten. HMRC runs an annual review to check you’ve stayed compliant, applying broadly the same tolerances as at the application stage. If you’ve been struggling with a tax bill and HMRC has formally agreed to give you time to pay, that arrangement won’t count against you. For limited companies, the review looks at the company’s record rather than the individual directors’.7GOV.UK. What You Must Do as a Construction Industry Scheme CIS Subcontractor – Annual Review
If HMRC cancels your gross payment status, you have 30 days to request an internal review or appeal directly to the tax tribunal. An internal review has to be completed within 45 days (or a longer agreed period), and if it upholds the cancellation, you get another 30 days to escalate to the tribunal.8HM Revenue & Customs. Appeals Against Refusal or Cancellation of Gross Payment Status The 30-day clock starts from the notice, so don’t sit on it.
How Contractors Confirm Your Status
Before paying you for the first time, a contractor has to verify you with HMRC. They also have to re-verify you if they haven’t included you on a CIS return in the current or last two tax years.9GOV.UK. What You Must Do as a Construction Industry Scheme CIS Contractor – Verify Subcontractors
Verification runs on your UTR plus either your National Insurance number (sole traders), company name and registration number (limited companies), or the nominated partner details and partnership UTR (partnerships). The details submitted must exactly match what you gave HMRC when you registered.9GOV.UK. What You Must Do as a Construction Industry Scheme CIS Contractor – Verify Subcontractors A typo in a company name or a mismatched UTR is enough for HMRC to fail the check, and the contractor then has to deduct at 30%. If that happens to you, the fix is to reconcile your records with what HMRC holds and ask the contractor to try the verification again.
Getting Deducted Tax Back
Whatever a contractor withholds isn’t extra tax — it’s an advance payment against what you already owe. How you reclaim it depends on your structure.
Sole traders and partnerships enter the full invoice amounts as income on their Self Assessment return and the total CIS deductions in the dedicated field. HMRC works out the actual liability and subtracts what’s already been deducted. Anything overpaid is refunded; anything still owing has to be paid by 31 January after the end of the tax year.10GOV.UK. Pay Tax and Claim Back Deductions
Limited companies offset CIS deductions against their monthly PAYE liabilities through the payroll. At year end, any deductions left over reduce the Corporation Tax bill, and anything still unused after that is refunded by HMRC once the company return is filed. Keep every deduction statement a contractor sends you — HMRC will want to see them before releasing a repayment.