How to register as a CIS subcontractor, step by step

Why register?

GOV.UK says contractors deduct 20% from payments to registered subcontractors and 30% from subcontractors who aren't registered. Registration isn't compulsory, but there's no upside to skipping it. On a £900 labour invoice, the difference is £270 held back instead of £180, so £90 a week sitting with HMRC until your tax return is settled.

Either way, the deductions count towards your tax and National Insurance bill. Registering simply means less of your money is tied up in the meantime.

What you'll need

According to GOV.UK, to register you need:

• your legal business name (and a trading name if you use a different one);
• the Unique Taxpayer Reference (UTR) for your business;
• your VAT registration number, if you're VAT registered;
• the date you started trading.

Depending on your circumstances, you might also need your National Insurance number, a Company Registration Number, a registering partner's UTR and National Insurance number, or a Joint Venture Agreement.

Step by step

1. Check you have a UTR. If you've filed Self Assessment as self-employed before, you already have one. It's 10 digits and appears on HMRC letters and in your online account.
2. No UTR? Register for Self Assessment as a new business. GOV.UK says to choose "working as a subcontractor" when prompted, and you'll be registered for Self Assessment and CIS at the same time. That's the quickest route if you're starting out.
3. Already have a UTR? Use the online CIS registration. You'll sign in (or create sign-in details). This registers you for "net payment status", meaning deductions at 20%.
4. Can't register online? GOV.UK has postal forms for sole traders, partnerships and limited companies.
5. Keep your confirmation and note the date you registered.

If you also pay other subcontractors for construction work, GOV.UK says you must register as a contractor as well as a subcontractor. Those are separate obligations.

What to tell each contractor

Before your first payment, a contractor has to verify you with HMRC, and HMRC tells them which rate to use. Give them:

• the name you registered with (exactly as registered: a mismatch is a common reason for a 30% result);
• your UTR;
• your National Insurance number if you're a sole trader, or company registration number if you're a company.

If your first payment arrives with 30% taken off when you're registered, ask the contractor what details they verified. A spelling difference or a trading name used instead of your legal name is often the cause, and the contractor can re-verify. Our labour-only invoice guide shows what to put on the invoice itself.

Tell HMRC about changes

GOV.UK asks subcontractors to tell HMRC about changes such as a new address, trading name or business partners, or if you stop trading. Keeping your record up to date avoids verification problems with new contractors.

After you've registered

• Invoice clearly. Split labour from any materials you bought, so the deduction is only taken on labour.
• Collect your statements. Each contractor must give you a payment and deduction statement for each tax month they pay you. Keep them all.
• File your Self Assessment return. The deductions are set against your tax and National Insurance. If too much was taken, you'll get it back (see claiming back CIS deductions).
• Consider gross payment status later. Once your business meets HMRC's tests, you can apply to be paid with no deductions at all.

This is general information, not tax advice. Check GOV.UK or speak to an accountant about your situation.

Worked example: why it's worth it

Lee is a labour-only bricklayer who earns £900 a week from one contractor. If he isn't registered, the contractor must deduct 30%: £270 a week. Once registered, the deduction drops to 20%: £180. That's £90 a week more in his pocket, or about £4,140 over a 46-week year. Both amounts count towards his tax bill and are reclaimed or offset through his Self Assessment, but registering means far less of his money is tied up with HMRC until then.

Common hold-ups

• No UTR yet. You need to be registered for Self Assessment first, and the UTR can take a while to arrive by post. Do this before your first job if you can.
• Name mismatch. The name you give the contractor must match the name HMRC holds, or verification can fail and you'll be deducted at 30%.
• Not telling the contractor. Registration doesn't help until the contractor verifies you. Give them your details before the first payment.

Once you're set up, see what to put on a CIS invoice.

Quick checklist before your first CIS job

• Registered for Self Assessment and holding your UTR.
• Registered as a CIS subcontractor, with the name exactly as HMRC holds it.
• Given the contractor your name, UTR and National Insurance number (or company details).
• Asked when they pay and when you'll get your monthly statements.

After you register, your contractor has to check you with HMRC. See what a CIS verification is and how to avoid the 30% rate.