How to register for CIS as a contractor: A step-by-step guide

If you’re about to take on your first subcontractor in the construction industry, you need to register for the Construction Industry Scheme (CIS) as a contractor before you make that first payment. There’s no grace period. HMRC expects registration to happen in advance, and operating outside CIS exposes your business to penalties that can quickly become significant.

This guide walks through exactly how to register, what you’ll need to have ready, and what your obligations look like once you’re set up. The registration process itself is straightforward; it’s the ongoing CIS compliance that catches most contractors off guard.

Key facts at a glance:

• Registration is mandatory for any business paying subcontractors for construction work
• You must register before paying your first subcontractor, not after
• “Deemed contractors” (non-construction businesses spending over £3m on construction in 12 months) must also register
• The process is completed online via HMRC’s Government Gateway

 

What Is CIS and who counts as a contractor?

The Construction Industry Scheme is HMRC’s framework for managing tax on payments made to subcontractors working in construction. Under CIS, contractors are required to deduct money from subcontractor payments and pass it directly to HMRC. Those deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.

The scheme applies to a wide range of construction activities, including site preparation, demolition, building work, alterations, repairs, decorating, and civil engineering. It does not apply to architecture, surveying, or the delivery of materials.

Who needs to register as a contractor?

HMRC defines a CIS contractor as any business or individual that:

• Pays subcontractors to carry out construction work, or
• Spends more than £3 million on construction in any rolling 12-month period (even if construction is not their primary business activity)

The second category, known as “deemed contractors”, catches a lot of businesses by surprise. Property developers, housing associations, and large retailers who commission construction work can all fall into this bracket. If your cumulative construction spend crosses the £3 million threshold, you are legally required to register and operate CIS, regardless of your industry.

The practical test: if money is changing hands for construction work and you are the one making the payment, you are likely the contractor under CIS.

What you need before you register

Before starting the registration process, make sure you have the following to hand. Missing any of these will slow things down.

What you need	Details
Government Gateway account	You’ll need a user ID and password. Create one at the HMRC sign-in page if you don’t already have one.
Unique Taxpayer Reference (UTR)	Your business UTR, issued when you registered for Self Assessment or Corporation Tax.
Employer PAYE reference	If you already employ staff, you’ll have this. If not, you’ll need to register as a new employer as part of the CIS process.
Business details	Legal name, trading address, contact number, and the nature of your construction activities.
National Insurance number	Required for sole traders registering in a personal capacity.
Company registration number	Required for limited companies.

One point worth noting: if you do not yet have an employer PAYE reference, registering for CIS as a contractor automatically triggers the setup of a PAYE scheme. HMRC will write to you with your employer PAYE reference number after registration is complete. Allow up to two weeks for this to arrive.

How to register for CIS as a contractor: Step by step

The registration process is handled online through HMRC’s Government Gateway. Here is how it works in practice.

Step 1: Sign in to your Government Gateway account

Go to HMRC’s CIS registration page and sign in with your Government Gateway credentials. If you do not have an account, you can create one during this process. You will need to verify your identity, so have your UTR and business details ready.

Step 2: Register as a new employer (if applicable)

CIS contractor registration follows the same pathway as registering as a new employer with HMRC. If your business does not yet have an employer PAYE reference, this step sets one up. Even if you have no employees and only use subcontractors, you still need to complete this step.

Step 3: Notify HMRC you are a CIS contractor

During the registration process, you will be asked to confirm that you will be paying subcontractors under CIS. This is the point at which HMRC sets up your Contractor Scheme. Make sure you select this option clearly; it is separate from simply registering as an employer.

Step 4: Receive confirmation from HMRC

Once registration is submitted, HMRC will write to you confirming your Contractor Scheme is active and providing your employer PAYE reference if you did not already have one. This letter is important: keep it, as it contains the reference numbers you will need when verifying subcontractors and submitting monthly returns.

Registering by phone

If you prefer to register by telephone, call the HMRC CIS helpline on 0300 200 3210. Have your UTR, business name, address, and National Insurance number (for sole traders) or company registration number (for limited companies) ready before you call.

What happens after you register

Registration is just the starting point. Once your Contractor Scheme is active, you take on a set of ongoing obligations that run every month, for every subcontractor you pay. Understanding these upfront prevents the compliance headaches that trip up a lot of newly registered contractors.

Verifying subcontractors

Before you pay a subcontractor for the first time, you must verify them with HMRC. This is not optional. Verification tells you the correct deduction rate to apply to their payments.

HMRC will return one of three outcomes:

Verification outcome	Deduction rate	What it means
Gross payment status	0%	Subcontractor is registered and approved for gross payment
Net payment (standard)	20%	Subcontractor is registered under CIS
Net payment (higher rate)	30%	Subcontractor is not registered with CIS

The 30% rate exists specifically to incentivise subcontractors to register. If you apply the wrong rate because you skipped verification, the liability sits with you as the contractor.

You can verify subcontractors online through your Government Gateway account, by phone via the CIS helpline, or through payroll software that integrates with HMRC’s systems.

Making deductions and paying HMRC

Once verified, you deduct the appropriate percentage from the labour element of each subcontractor payment (materials are excluded from deductions). Those deductions are paid to HMRC, typically alongside your PAYE payments, by the 19th of the following month (or 22nd if paying electronically).

Submitting monthly returns

Every month, you must submit a CIS return to HMRC showing:

• The names and UTRs of all subcontractors paid that month
• The gross amount paid to each
• The deductions made

Returns are due by the 19th of each month following the tax month in which payments were made. Missing a return, even if you made no payments, triggers an automatic £100 penalty. Returns for months with no subcontractor payments still need to be submitted as a nil return, unless you have notified HMRC that your scheme is inactive.

Providing deduction statements to subcontractors

For every payment made under deduction, you must give the subcontractor a written statement showing the gross amount, the deduction made, and the net amount paid. This is their record for reclaiming overpaid tax through their own Self Assessment return.

Common mistakes contractors make with CIS

Most CIS compliance problems are avoidable. These are the errors HMRC sees most frequently from newly registered contractors.

• Paying subcontractors before verifying them. The verification step is a legal requirement, not a formality. Skipping it and applying the wrong deduction rate can result in HMRC recovering the difference from you.
• Treating all payments as subject to deduction. Deductions apply only to the labour element of a payment. The cost of materials supplied by the subcontractor is excluded. Getting this wrong means either over-deducting (which creates cash flow problems for subcontractors) or under-deducting (which creates liability for you).
• Missing nil returns. If you had no subcontractor payments in a given month, you still need to file a nil return or notify HMRC that your scheme is temporarily inactive. The £100 automatic penalty for a missed return applies regardless of whether any payments were made.
• Misclassifying workers. Paying someone under CIS does not automatically make them self-employed. Employment status is a separate question determined by the nature of the working relationship, not the payment method. Misclassification carries its own significant penalties.
• Failing to keep records. HMRC can inspect your CIS records at any time. You are required to keep records of all subcontractor verifications, payments, deductions, and monthly returns for at least three years.

 

CIS Penalties: What non-compliance costs

It is worth being clear-eyed about the financial consequences of getting CIS wrong, because the penalties escalate quickly.

Failure	Penalty
Late monthly return (up to 2 months)	£100 per return
Late monthly return (2–12 months)	£200 per return
Late monthly return (over 12 months)	Higher of £300 or 5% of deductions due
Incorrect return (careless)	Up to 30% of the understated amount
Incorrect return (deliberate)	Up to 70% (or 100% if concealed)
Failure to verify a subcontractor	Liability for the difference in deductions

The monthly return penalties are cumulative. A contractor who misses three months of returns could face £600 in automatic penalties before HMRC has even looked at the accuracy of the underlying figures. For businesses operating at scale with multiple subcontractors, the stakes are considerably higher.

If you’ve recently received a penalty for CIS read our guide to CIS penalty appeal here.

The most important takeaway: CIS compliance is not a one-time task. It is a monthly obligation that runs for as long as your Contractor Scheme is active.

Getting CIS right from day one

Registering for CIS as a contractor takes minutes online. The harder part is building the processes around it: verifying subcontractors before first payment, deducting the right amounts, filing on time every month, and keeping clean records throughout.

For construction businesses managing a large or fluctuating subcontractor workforce, the administrative burden of CIS compliance adds up fast. Many firms choose to work with a specialist payroll or CIS compliance provider to handle verification, deductions, monthly returns, and subcontractor statements, reducing the risk of errors and freeing up time to focus on the work itself.

Hudson Contract has been working with construction businesses on CIS compliance since 1996. If you want to understand how compliant your current setup is, or you are setting up CIS for the first time and want expert guidance, get in touch with our team.