This step-by-step guide to CIS registration online shows you what you need to do, from start to finish, to register as a CIS Subcontractor online and get your CIS card. I’ll cover everything you should know about CIS and includes: registering as a subcontractor, how to check your tax status, your responsibilities and some tips on reducing your tax bill.
You only need to register for a CIS number if you work for someone in the construction industry and you’ll need to follow the rules set out by HMRC regarding self assessment. The tax scheme was introduced to reduce tax evasion within the construction industry, where subcontractors who were self-employed were working, but not declaring their income for taxes. Or, they were faced with huge unexpected tax bills that they struggled to pay.
[This is part of the Understanding Self Employment Series]
Table of Contents
- 1. How Does the Construction Scheme Industry Work?
- 2. Are CIS Subcontractors Classed as Self-Employed?
- 3. Do You Need to Register as a Subcontractor?
- 4. How to Apply for CIS Registration
- 5. Step-by-Step Guide to CIS Registration Online
- 6. What is CIS Gross Payment Status?
- 7. How to Register by Phone
- 8. How Long Does it Take to Apply For CIS Online
- 9. What Happens if You Fail to Register as a CIS Subcontractor
- 10. What Happens Once You’re A Registered CIS Subcontractor
- 11. What is a CIS Payment and Deduction Statement?
- 12. CIS Invoice Template for Subcontractors
- 13. Allowable Expenses for CIS Contractors
- 14. Can I Get Paid Without a UTR?
1. How Does the Construction Scheme Industry Work?
Construction Scheme Industry is also known as ‘CIS’. The CIS Scheme affects contractors who employ self-employed subcontractors. Contractors are legally required to deduct a fixed amount every time they pay a subcontractor.
This set deduction is usually 20% for contractors registered for CIS or 30% for subcontractors who are not CIS registered. It is essentially a tax deduction paid over to HMRC on the subcontractor’s behalf.
Anyone who is self-employed must report their earnings and work out their tax once a year in a tax return by 31 January each year. So, when a subcontractor completes their CIS tax return each year, they can deduct for allowable expenses to reduce their tax bill, balance up how much tax has been deducted by the contractors they worked for and, for some, get a tax refund.
Payments can be made without any deduction in special circumstances, there’s more about “Gross Payment Status” later.
2. Are CIS Subcontractors Classed as Self-Employed?
There’s basically no difference between being a subcontractor and becoming self-employed. However, under CIS, the contractors you work for will make a tax deduction every time they pay you. This deduction is unique to the Construction Industry and other self-employed people are unlikely to have this deduction made.
Apart from this, the HMRC requirements are the same. Whether you are self-employed or a subcontractor, you’ll be required to:
- Keep records of your income and expenses;
- Work out your own taxes and pay them twice a year;
- Fill in a CIS tax return by 31 January each year.
3. Do You Need to Register as a Subcontractor?
Before you register with HMRC as a subcontractor, it will help to check whether you need to register as a CIS subcontractor. If you are exempt from CIS you’ll avoid needing to set up as self-employed. HMRC sets out really detailed rules as to what it considers construction work and who falls under the rules of CIS.
Their rules cover most construction work in the UK including work to:
- preparing the site, eg laying foundations and providing access works
- demolition and dismantling
- building work
- alterations, repairs and decorating
- installing systems for heating, lighting, power, water and ventilation
- cleaning the inside of buildings after construction work
- a permanent or temporary building or structure
- civil engineering work like roads and bridges
3.1 Who Doesn’t Need to Register as a Subcontractor?
Certain trades, although still involved in the construction industry, are exempt from registering for CIS. This includes:
- architecture and surveying;
- scaffolding hire (with no labour);
- carpet fitting;
- making materials used in construction including plant and machinery delivering materials;
- work on construction sites that’s clearly not construction, eg running a canteen or site facilities
If you are unsure whether you need to register as a contractor, then call the HMRC CIS Helpline on 0300 200 3210 to discuss your situation.
4. How to Apply for CIS Registration
There is a two-step process to Register as a Self-Employed CIS Subcontractor. Both steps can be completed online and you can do it yourself in most cases. You’ll need to:
- Register as Self-Employed
- Register with HMRC as a CIS subcontractor
Register as a CIS subcontractoras soon as possible to avoid payment issues and penalties from HMRC.
1. How to Register as Self-Employed Online
If self-employment is new to you, you’ll need to register with HMRC online. Read this guide to help you complete this part of your registration.
If you are already registered with HMRC and submit a tax return for another reason. Skip to Step 2 – How to Registered for CIS Online below and read more about gross payment status if you wish. If you registered for self-employed twice, HMRC will expect two tax returns from you.
Before you start the registering as self-employed online, make sure you have your National Insurance number handy.
You’ll then need to complete the following steps:
- Visit the HMRC website and choose the option to “Register Online”;
- Set up your HMRC online account so you can manage your taxes online;
- Enrol for self-assessment online;
- Wait for your UTR number to be posted to you (can take up to 10 days)
- Wait for your activation code so you can complete setup of your HMRC online account.
Keep your UTR number and login details for your HMRC online account safe. You’ll need these to manage your taxes and register as a CIS subcontractor.
2. Register as a CIS Subcontractor Online
Once you have successfully registered as self-employed and have received your UTR number from HMRC then you can register as a CIS subcontractor online.
To complete your CIS registration online you’ll need to:
- Have your UTR number and HMRC Online account login details ready;
- Visit the HMRC website;
- Choose the option to “Register for CIS Online”;
- Enter your HMRC Online Account User ID and password;
- Complete the online CIS registration form.
5. Step-by-Step Guide to CIS Registration Online
Step 1: Choose whether you are registering for net or gross CIS payments (see below for more information on gross CIS payments).
Step 2: Enter your personal details, including your National Insurance number. Your UTR number will be automatically included on the form, but you should check it is correct.
Step 3: Enter details about your self-employment and whether you have been paid as a subcontractor before.
Step 4: If you use a trading name, enter it now for HMRC as well as your address.
Step 5: You’ll be presented with a summary of all the information you have entered. Check it is all correct, use the “edit” button if anything is incorrect.
Step 6: Finally, you will be presented with a declaration for you to agree to. Read the CIS declaration through and, if you are happy, press “Accept and Register”.
6. What is CIS Gross Payment Status?
Subcontractors with CIS Gross Payment Status receive their payments in full, without any deductions. That means they will pay all their tax and National Insurance every time they complete a CIS tax return. This is as well as possibly paying a payment on account every July, depending on their status.
6.1 Who Qualifies for CIS Gross Payment Status?
Not everyone qualifies, you must meet the criteria set out by HMRC. You’ll need to show that you:
- have paid all your tax and National Insurance on time in the past;
- work in the UK construction industry;
- run your business through a business bank account, take a look at Starling.
Your turnover must also be £30,000 if you are self-employed excluding:
- VAT and
- The cost of materials.
6.2 How to Apply for CIS Gross Payment Status
If you are eligible, you can apply for gross payment status:
- As part of your application to register as a subcontractor online;
- By calling the HMRC CIS Helpline on 0300 200 3210
Your Gross Payment Status will be reviewed by HMRC every year. If it is found that you are no longer eligible, your status will be removed and they will write to you to explain your decision.
Always pay your taxes and file your tax return on time to retain CIS gross payment status.
7. How to Register by Phone
If you cannot go online, you can choose to register as a subcontractor by phone. You’ll need to call the HMRC CIS Registration phone line on 0300 200 3210.
8. How Long Does it Take to Apply For CIS Online?
If you are already registered as self-employed then registering as a subcontractor may only take a few days. If you need to register as self-employed then you will need to allow more time. Registering as self-employed and getting a UTR number can take up to 10 days. You can only proceed to register as a CIS subcontractor once this is completed.
9. What Happens if You Fail to Register as a CIS Subcontractor?
The consequences for failing to register for CIS include:
- Automatic deduction of 30% from your pay by the contractor you work for;
- An automatic penalty of £100 by HMRC for failing to register as self-employed;
- Further automatic penalties for failing to submit a self-assessment tax return forms;
- Penalties and tax estimates made by HMRC that you will need to pay unless you submit a self-assessment tax return.
So if you are undertaking construction work, don’t delay and make sure you register as a CIS subcontractor.
10. What Happens Once You’re A Registered CIS Subcontractor?
Once registered you will receive your CIS number and you’ll need to:
- Invoice your contractors for the work you have done and any materials you have bought;
- Keep hold of your CIS statements for tax time so you know how much tax has been deducted from your payments;
- Fill in a tax return online by 31 January each year;
- Claim for all your expenses to reduce your tax bill;
- Pay your taxes by 31 January each year;
- Keep records and receipts for all your income and expenses for 6 years.
11. What is a CIS Payment and Deduction Statement?
A CIS statement is a payment and deduction summary which be issued every time a contractor pays you. It details the amount you have been paid, along with details of the tax that have deducted and paid to HMRC. You must make sure the contractor you are working for gives you a statement every single time they pay you.
It is a legal requirement and will make filling in your CIS tax return easy so don’t lose them. CIS statements normally includes the following details:
- UTR number;
- Home address;
- The month statement covers;
- The rate they have used to make your tax deduction;
- The amount they have paid you, detailing out the amount of tax deducted on your behalf.
12. CIS Invoice Template for Subcontractors
As a registered CIS contractor, you’ll need to invoice your contractors for work completed each month so you can get paid. An invoice is a demand for payment with details of what services and goods you have provided. Here is a CIS invoice template for subcontractors for you to download.
You should note that your CIS deduction should be calculated on labour only, not materials. So, if you are charging your contractor for any goods or materials, they should not make a CIS deduction on them when they pay you.
13. Allowable Expenses for CIS Contractors
The easiest way to reduce your tax bill when you are self-employed is to make sure that you claim all the expenses you can against your income.You can’t always claim for all your expenses, just ones that HMRC consider allowable.
Typical allowable expenses for CIS subcontractors include:
- Safety equipment;
- Certain clothing;
- Mileage and travel;
- Home office;
- Mobile phone (business only);
- Accountants fees, if you hire one;
- Bank charges for a business bank account.
It is really important to keep hold of receipts for all your expenses. Not only is it a requirement of HMRC, but it means you won’t forget to claim anything when tax time comes. For many subcontractors, once they have prepared their CIS tax return they find that they are owed a tax refund. This is due to the combination of tax already deducted by contractors they worked for and claiming for allowable CIS expenses.
14. Can I Get Paid Without a UTR?
If you are self-employed then you should not have to give your UTR number to someone to get paid. In fact, the number is highly confidential and could give someone access to a lot of personal information that HMRC hold about you. It could be that they are:
- paying you under the rules of CIS and need to know what tax rate to use;
- checking whether you are really self-employed.
Either way, you should be able to submit an invoice and receive payment without share this piece of information. Have a chat with the person requesting it and advise them that you are self-employed and will submit an invoice for them to pay without it.
[This is part of the Understanding Self Employment Series]
Updated 20 December 2020