Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).
The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
Contractors must register for the scheme. Subcontractors don’t have to register, but deductions are taken from their payments at a higher rate if they’re not registered.
Register as a contractor if either:
• You pay subcontractors for construction work
• Your business doesn’t do construction work but you spend an average of more than £1 million a year on construction in any 3-year period
Register as a subcontractor if you do construction work for a contractor.
You must register as both if you fall under both categories.