Using occasional labour on construction jobs - your CIS obligations

If you are a self-employed tradesperson - a plumber, electrician, builder, decorator, or any other construction worker - and you sometimes pay someone to help you on a job, you may have CIS obligations.

This guide uses real scenarios to help you understand when CIS applies and what you need to do. The rules are the same whether you use help once a year or once a week.

The key question: Are you paying someone else to do construction work?

CIS applies when you pay another person (not an employee) to do construction work. It does not matter how often you do this or how much you pay them. Even paying a mate to help you on one job can trigger CIS requirements.

If you pay someone to do construction work, you become a CIS contractor. This means you must:

Register as a CIS contractor with HMRC (before you pay them)
Verify the worker with HMRC (before you pay them)
Deduct tax from their payment at the correct rate
File a monthly return to HMRC
Give the worker a statement showing what you paid and deducted

Scenario 1: "I'm a plumber who sometimes uses a labourer"

The situation: You are a self-employed plumber. Occasionally, on bigger jobs, you bring in a labourer to help with the heavy lifting, digging, or general site preparation. You pay them cash at the end of the day.

Does CIS apply? Yes. You are paying someone to do construction work (labouring on a construction site counts). You are the contractor, they are the subcontractor.

What you must do:

Before the first payment: Register as a CIS contractor with HMRC. Do this online at gov.uk/register-employer - it is free and takes about 10 minutes.
Before you pay the labourer: Verify them with HMRC using the CIS online service. You need their name, Unique Taxpayer Reference (UTR), and National Insurance number. HMRC will tell you what tax rate to deduct.
When you pay them: Deduct tax at the rate HMRC told you (20% if they are registered, 30% if not) from the labour payment.
After the tax month ends: File a CIS return by the 19th of the following month and pay the deductions to HMRC by the 22nd.

Example calculation:

You pay your labourer 150 pounds for a day's work. They are registered for CIS (20% rate):

Gross payment: 150 pounds
CIS deduction (20%): 30 pounds
Net payment to labourer: 120 pounds
You pay 120 pounds to the labourer and 30 pounds to HMRC

Scenario 2: "My mate helped me on a job - I paid him in cash"

The situation: Your friend helped you on a bathroom installation last Saturday. You gave him 100 pounds cash at the end of the day. He does not do construction work regularly - he just helped out as a favour.

Does CIS apply? Yes. The law does not care that he is your mate, that it was a one-off, or that you paid cash. You paid someone to do construction work. That makes you a CIS contractor.

What should you have done:

Registered as a CIS contractor before paying him
Verified him with HMRC (or applied the 30% unregistered rate if he has no UTR)
Deducted tax from his payment
Filed a monthly return

What happens if you did not: If HMRC finds out, you could face:

Penalties for not registering as a contractor
Liability for the tax you should have deducted (you pay it, not him)
Late filing penalties for missed CIS returns

The bottom line: Even "cash in hand" payments to mates must go through CIS if the work is construction-related.

Scenario 3: "I'm a sole trader but I employ an apprentice"

The situation: You are a self-employed electrician. You have taken on an apprentice who works alongside you. You pay them through PAYE, deducting income tax and National Insurance like a normal employer.

Does CIS apply? No - not for your apprentice. CIS only applies to payments to self-employed subcontractors. Your apprentice is your employee, so you handle their tax through PAYE, not CIS.

But be careful: If you also use other self-employed workers on jobs (not employees), CIS applies to those payments. You can be a PAYE employer and a CIS contractor at the same time.

Scenario 4: "I subcontract work to another tradesperson"

The situation: You are a general builder. A customer asks you to do a kitchen extension. You do the brickwork yourself but hire an electrician and a plumber to do their bits. You pay them directly.

Does CIS apply? Yes. You are paying subcontractors to do construction work. This is the classic CIS situation.

What you must do:

Be registered as a CIS contractor
Verify both the electrician and the plumber with HMRC before paying them
Deduct tax from the labour element of their invoices (not materials)
Include both subcontractors on your monthly CIS return
Give each of them a payment and deduction statement

CIS deduction rates 2025/26

Construction Industry Scheme deduction rates applied to subcontractor payments. Contractors must deduct tax at source based on the subcontractor's registration status. Rates are set by HMRC and apply UK-wide.

Registered subcontractor rate: 20%
Unregistered subcontractor rate: 30%
Gross payment status rate: 0% (no deductions)
Effective from: Current tax year 2025/26
Deduction basis: Labour element only (excluding VAT and materials)

When to apply each rate:

20% rate - Subcontractor is registered with HMRC for CIS but does not have gross payment status. This is the standard rate for most registered subcontractors.
30% rate - Subcontractor is not registered with HMRC, or their details cannot be verified. Always verify subcontractors before first payment.
0% rate (gross payment) - Subcontractor has been granted gross payment status by HMRC. They receive full payment and account for tax themselves via Self Assessment or Corporation Tax.

Important: Deductions are calculated on the labour element only. Exclude VAT and any materials the subcontractor has directly paid for.

What is the Construction Industry Scheme

CIS contractor - make deductions and pay subcontractors

What counts as "construction work"?

CIS applies to a wide range of work. It is not just building houses. Construction operations include:

Building work: New builds, extensions, renovations
Repairs and maintenance: Fixing roofs, repairing walls, refurbishment
Decorating: Painting, wallpapering, tiling
Alterations: Knocking through walls, fitting new windows
Demolition: Knocking down buildings or structures
Civil engineering: Groundwork, drainage, paving
Installing systems: Heating, plumbing, electrics, air conditioning
Cleaning buildings: During or after construction

What is NOT covered:

Architecture and surveying (professional services, not physical work)
Carpet fitting
Delivering materials (unless you also install them)
Manufacturing materials off-site
Work on your own home

How to register as a CIS contractor

Registration is quick, free, and must be done before you make your first payment to a subcontractor.

Register as a CIS contractor

Step-by-step process for registering as a contractor under the Construction Industry Scheme (CIS). This is required before you pay subcontractors for construction work. Contractors must register with HMRC as an employer and set up CIS to verify subcontractors and file monthly returns.

Who must register as a CIS contractor?

You must register as a CIS contractor if you:

Pay subcontractors for construction work (regardless of your industry)
Spend over 3 million GBP on construction operations in any rolling 12-month period (you become a 'deemed contractor' even if construction is not your main business)

Important: You must register before making your first payment to a subcontractor. Failure to register and operate CIS can result in penalties.

Prerequisites

Government Gateway account (create one if you don't have one)
Business details (name, address, trading name if different)
Unique Taxpayer Reference (UTR) for your business
Company Registration Number (if a limited company)
Details of your first subcontractor payment (expected date)

Check if you need to register as a CIS contractor – You must register if you pay subcontractors for construction work OR if your business spends over 3 million GBP on construction operations in any rolling 12-month period (making you a 'deemed contractor'). Construction operations include building, repairs, decorating, demolition, and civil engineering work.
Register as an employer with HMRC – Go to gov.uk/register-employer and complete the online registration. You will need your business details, expected first payment date, and Government Gateway account. If you already employ people and have a PAYE scheme, you can add CIS to your existing registration.
Gather required information – You will need: your Employer PAYE reference (received after registration), Accounts Office reference (on correspondence from HMRC), business UTR, and details of subcontractors you will pay.
Receive your employer PAYE reference – HMRC will send a letter with your employer PAYE reference number (format: 123/AB45678) and Accounts Office reference. This typically takes up to 10 working days. You can use the PAYE reference immediately for verification, but activation codes for online services take longer.
Add CIS to your business tax account – Sign in to your Business Tax Account at gov.uk/log-in-register-hmrc-online-services. Add the CIS service to access online verification, returns filing, and payment services.
Set up payroll software for CIS – Configure your payroll or accounting software to handle CIS. You will need to: verify subcontractors, calculate deductions (20% or 30%), generate payment and deduction statements, and file monthly CIS returns. Many commercial payroll packages include CIS functionality.

What happens after registration

Once registered, you must:

Verify every subcontractor before first payment using the CIS online service
Make correct deductions (20% for registered subcontractors, 30% for unregistered, 0% for gross payment status holders)
Give payment and deduction statements to subcontractors within 14 days of each tax month end
File monthly CIS returns by the 19th of each month (even if you made no payments)
Pay deductions to HMRC by 22nd of each month (electronic) or 19th (postal)
Keep records for at least 3 years after the end of the tax year

Registration deadline: Before first payment to subcontractors
Processing time: Up to 10 working days for PAYE reference
Monthly return deadline: 19th of following month
Payment deadline (electronic): 22nd of following month
Payment deadline (post): 19th of following month
Record retention: 3 years after end of tax year

Outcomes

Employer PAYE reference number for CIS and payroll
Accounts Office reference for HMRC correspondence
Access to CIS online services (verify, file returns, pay)
Ability to legally pay subcontractors for construction work

What you must do as a CIS contractor

CIS Online Service

Verifying your subcontractor - why it matters

Before you pay anyone for construction work, you must verify them with HMRC. Verification tells you how much tax to deduct:

0% (gross payment status): The subcontractor has qualified for gross payments. Pay them the full amount. Rare for casual labourers.
20% (registered): The subcontractor is registered for CIS. Deduct 20% from the labour payment.
30% (unregistered): The subcontractor is not registered, or you cannot verify them. Deduct 30% from the labour payment.

If you skip verification and just pay without deducting tax, you become liable for the tax yourself. HMRC can come after you for the money.

CIS subcontractor verification process

Step-by-step procedure for verifying subcontractors before making payments under the Construction Industry Scheme. Contractors must verify every new subcontractor and re-verify if they have not been included on a CIS return in the current or last 2 tax years.

When verification is required

You must verify a subcontractor with HMRC:

Before the first payment - Verify every new subcontractor before you pay them for the first time
After a gap in payments - Re-verify if the subcontractor has not been included on any of your CIS returns in the current tax year or the previous 2 tax years

You cannot make a payment without first completing verification. If verification is not possible, you must apply the 30% deduction rate.

Gather your contractor details – You will need your Employer PAYE reference number and your Accounts Office reference number. Both are issued when you register as a CIS contractor.
Collect subcontractor information – Request the subcontractor's details, which must match HMRC records exactly. For a sole trader: full name, Unique Taxpayer Reference (UTR), and National Insurance number. For a partnership: partnership name, partnership UTR, plus the registering partner's name, UTR, and NI number. For a limited company: company name, company UTR, and Companies House registration number.
Sign in to the CIS online service – Go to the Government Gateway and access the CIS online service. You need a Government Gateway user ID and password linked to your business tax account with CIS added.
Submit verification request – Enter the subcontractor's details exactly as registered with HMRC. The online service can verify up to 50 subcontractors. If you need to verify more than 50, you must use commercial CIS software.
Receive verification response – HMRC will immediately tell you whether the subcontractor is registered and what deduction rate to apply: 0% (gross payment status), 20% (registered), or 30% (unregistered or unmatched). You will also receive a verification number.
Handle unmatched verification – If HMRC cannot match the subcontractor's details, apply the 30% deduction rate. Ask the subcontractor to check their registration details with HMRC - they may need to update their records. Once they confirm their details are correct, verify again.
Record the verification number – Keep the verification number with your CIS records. You must include this number on your monthly CIS return when reporting payments to the subcontractor.

Verification number validity

A verification remains valid as long as you include the subcontractor on at least one CIS return within a rolling period covering the current tax year plus the previous 2 tax years. After this period without any returns including that subcontractor, you must verify them again before making further payments.

Maximum online verifications: 50 subcontractors (use CIS software for more)
Verification validity period: Current + last 2 tax years (must appear on at least one return)
Unregistered rate: 30% deduction if verification fails or subcontractor not registered
Registered rate: 20% deduction for registered subcontractors
Gross payment rate: 0% deduction for gross payment status holders

Information needed for verification by business type

Business type	Required information
Sole trader	Full name, UTR, National Insurance number
Partnership	Partnership name, partnership UTR, plus registering partner's name, UTR, and NI number
Limited company	Company name, company UTR, Companies House registration number

Important: Details must match HMRC records exactly. Minor discrepancies (such as using 'Ltd' instead of 'Limited') can cause verification to fail.

Record keeping requirements

Keep verification records for at least 3 years after the end of the tax year they relate to. Records must include:

Subcontractor's name, UTR, and other identification details
Verification number from HMRC
Date of verification
Deduction rate confirmed

HMRC can ask to see these records at any time. Failure to produce CIS records when requested can result in a penalty of up to 3,000 pounds.

Use the Construction Industry Scheme online

CIS contractor - verify subcontractors

Filing monthly returns - even when you have not used anyone

Once you are registered as a CIS contractor, you must file a return every month - even if you did not pay any subcontractors that month (this is called a "nil return").

Returns cover a "tax month" which runs from the 6th of one month to the 5th of the next. For example:

Tax month: 6 January to 5 February
Return deadline: 19 February
Payment deadline: 22 February (electronic) or 19 February (post)

If you know you will not be using subcontractors for a while, you can ask HMRC to set your CIS to "inactive" for up to 6 months. This stops the need for nil returns during that period.

CIS payment and return deadlines

Monthly return filing deadlines and payment due dates for the Construction Industry Scheme. Tier 1 atomic data.

Tax month definition: 6th of one month to 5th of the following month
Monthly return deadline: 19th of the month following the tax month
Electronic payment deadline: 22nd of the month following the tax month
Postal payment deadline: 19th of the month following the tax month
Payment and deduction statement (PDS) deadline: Within 14 days of end of each tax month

CIS returns cover a tax month which runs from the 6th of one month to the 5th of the next. For example, the return for 6 May to 5 June must be filed by 19 June. If paying CIS deductions electronically (including by Direct Debit, Bacs, or CHAPS), the deadline is the 22nd. If paying by post, the deadline is the 19th. You must give subcontractors a payment and deduction statement within 14 days of the end of each tax month.

File your CIS monthly returns

The penalties for getting it wrong

CIS penalties can add up quickly, especially for small businesses:

Late filing penalties

1 day late: 100 pounds per 50 subcontractors (minimum 100 pounds)
2 months late: Additional 200 pounds
6 months late: 5% of deductions due or 300 pounds (whichever is greater)
12 months late: Another 5% or 300 pounds

Other penalties

Not registering: You are liable for the tax you should have deducted
Not verifying: You may have applied the wrong rate
Poor record keeping: Up to 3,000 pounds if you cannot show records

Key point: If you should have deducted tax but did not, HMRC can make you pay it. You cannot recover it from the subcontractor after the fact.

Practical tips for occasional users of labour

Before you take on any job where you might need help:

Register as a CIS contractor - do it once, then you are ready when needed
Set up a simple system for tracking subcontractor payments
Keep a folder (paper or digital) for CIS records

Before you use someone for the first time:

Ask for their UTR and NI number in writing (by text or email is fine)
Verify them with HMRC using the online service
Tell them what rate you will deduct so there are no surprises

When you pay them:

Calculate the deduction (20% or 30% of the labour payment)
Pay them the net amount
Give them a written statement showing what you paid and deducted
Keep records of the payment and deduction

At the end of each tax month:

File your CIS return by the 19th (even if it is a nil return)
Pay the deductions to HMRC by the 22nd

Common questions from sole traders

"Do I need to use an accountant?"

No, but many sole traders find it easier. If you only use occasional labour, you can manage CIS yourself using the free HMRC online service. But if you are using subcontractors regularly, accounting software that handles CIS can save time and reduce errors.

"What if the person I pay refuses to give me their UTR?"

Apply the 30% deduction rate. You must still verify them (which will fail if they are unregistered) and deduct tax. It is their choice not to register, but you cannot avoid your obligations as a contractor.

"Can I just add the tax to their pay so they get what they expected?"

You can agree a "gross" amount and calculate backwards, but you must still make and report the deduction. For example, if you agree they will receive 120 pounds net (after 20% deduction), the gross payment is 150 pounds and you deduct 30 pounds.

"What if I only use family members?"

Family members are treated the same as anyone else. If they are self-employed and you pay them for construction work, CIS applies. If they are your employees, use PAYE instead.

"I forgot to deduct tax - what now?"

Contact HMRC as soon as possible. You may be able to correct the error. But if you cannot recover the tax from the subcontractor, you will have to pay it yourself. The longer you leave it, the worse it gets.

Record keeping requirements

Keep CIS records for at least 3 years after the end of the tax year they relate to. You need to be able to show HMRC:

Details of each subcontractor (name, UTR, NI number or company number)
Verification numbers from HMRC
Dates and amounts of each payment
How you calculated deductions (labour versus materials)
Copies of payment and deduction statements you gave out
Copies of monthly returns filed

Tip: Take photos of paper records or save emails confirming payments. If you pay by bank transfer, your bank statements help prove payments.

What to do next

If you sometimes use labour on construction jobs:

Register now - Do not wait until you need to pay someone. Being registered costs nothing and means you are ready.
Set up online access - Add CIS to your business tax account so you can verify subcontractors and file returns online.
Tell your regular helpers - If you have people you use occasionally, let them know about CIS so they understand why you are deducting tax.
Keep it simple - A notebook or spreadsheet tracking who you paid, when, and how much deducted is enough for occasional users.

Related guides

Register as a CIS contractor - detailed registration process
Verify a subcontractor's CIS status - how to verify subcontractors
Calculate CIS deductions - how to work out the correct deduction
Submit your CIS monthly return - step-by-step filing guide
Register as a CIS subcontractor - if you also work for other contractors

Business Context Testing

Content Graph

Guvnor

Using occasional labour on construction jobs - your CIS obligations

The key question: Are you paying someone else to do construction work?

Scenario 1: "I'm a plumber who sometimes uses a labourer"

Scenario 2: "My mate helped me on a job - I paid him in cash"

Scenario 3: "I'm a sole trader but I employ an apprentice"

Scenario 4: "I subcontract work to another tradesperson"

What counts as "construction work"?

How to register as a CIS contractor

Verifying your subcontractor - why it matters

Filing monthly returns - even when you have not used anyone

The penalties for getting it wrong

Late filing penalties

Other penalties

Practical tips for occasional users of labour

Common questions from sole traders

"Do I need to use an accountant?"

"What if the person I pay refuses to give me their UTR?"

"Can I just add the tax to their pay so they get what they expected?"

"What if I only use family members?"

"I forgot to deduct tax - what now?"

Record keeping requirements

What to do next

Related guides

Compliance Assistant

🧪 Business Context Testing

◉ Content Graph

The key question: Are you paying someone else to do construction work?

Scenario 1: "I'm a plumber who sometimes uses a labourer"

Scenario 2: "My mate helped me on a job - I paid him in cash"

Scenario 3: "I'm a sole trader but I employ an apprentice"

Scenario 4: "I subcontract work to another tradesperson"

What counts as "construction work"?

How to register as a CIS contractor

Verifying your subcontractor - why it matters

Filing monthly returns - even when you have not used anyone

The penalties for getting it wrong

Late filing penalties

Other penalties

Practical tips for occasional users of labour

Common questions from sole traders

"Do I need to use an accountant?"

"What if the person I pay refuses to give me their UTR?"

"Can I just add the tax to their pay so they get what they expected?"

"What if I only use family members?"

"I forgot to deduct tax - what now?"

Record keeping requirements

What to do next

Related guides

Related guides in Business Tax Overview

Business Context Testing

Content Graph