Contractor or subcontractor under CIS? The registration you may be missing

Treating “contractor” as another name for the main contractor is the mistake. Whether you are contractor or subcontractor under the Construction Industry Scheme depends on the particular contract.

You can be both, with duties on each side, as set out in CIS explained for UK trades. If you already receive CIS payments and now subcontract part of your work, you have a separate registration to deal with.

Employment status comes before either registration

You assess someone’s employment status for the job when you first engage them directly. CIS340 puts that responsibility on you. If the arrangement is employment, PAYE applies. Section 57 of the Finance Act 2004 excludes contracts of employment from CIS.

Their existing CIS registration does not settle it. CIS340 treats previous self-employment as irrelevant: the terms of this engagement matter.

HMRC’s construction-specific manual page ESM4324 describes a long-term worker paid by time and subject to extensive control. Personal service is required, and the engager supplies materials and equipment apart from small tools. HMRC treats that combined picture as pointing towards employment.

For self-employment, HMRC gives the example of a plumber responsible for a defined package, supplying materials and bearing the cost of correcting defective work.

ESM4325 applies similar considerations to short engagements, including examples of brief jobs treated as employment. Your CIS monthly return includes a declaration that you have considered employment status, according to CIS340.

Contractor or subcontractor under CIS: you can be both

You can take on a package for a main contractor and engage another business to carry out part of it.

Handing part of your package to another business does not move you out of the subcontractor position above you. Section 58 of the Finance Act 2004 covers the party answerable to a contractor for operations carried out by others. Section 57(2)(b)(i) puts you in the contractor position for the work you subcontract.

CIS340, updated on 27 August 2026 and consulted on 21 September 2026, warns that these words have special meanings within the scheme.

What decides the role?	You as subcontractor	You as contractor
The agreement	You undertake construction work for a CIS contractor.	You engage another business to carry out some or all of that work.
The relationship	The contractor above you pays your business.	Your business pays the subcontractor below you.
Registration	The subcontractor route uses your business Unique Taxpayer Reference, or UTR.	The contractor route uses HMRC’s employer-registration process.
Existing staff	Your employees can perform the work you undertake.	HMRC converts your existing PAYE scheme to PAYE/CIS.

CIS340 paragraph 2.18 includes legally binding verbal agreements as well as written contracts. Work agreed over the phone can therefore fall within CIS.

HMRC’s CISR13020 also includes a main contractor engaged by a client that is itself a CIS contractor, such as a local authority. The main contractor can be a subcontractor and still keep the best chair in the site office.

Already a subcontractor: you still need contractor registration

You may already have a UTR and confirmation of subcontractor registration. Contractor registration is a separate route, and it starts somewhere else.

GOV.UK’s scheme overview says: “You must register as both if you fall under both categories.” CIS340 describes separate registration routes.

Subcontractor registration uses your legal business name and Unique Taxpayer Reference, or UTR. HMRC also asks for your trading start date and VAT registration number if applicable. The route depends on your business structure.

For contractor registration, GOV.UK requires you to register “before you take on your first subcontractor”. If you have already paid one, those payments stay inside the scheme, with whatever it required of them, and registering is where you start putting that right. CIS340 describes the point when you are about to take on and pay that subcontractor.

The contractor duties covered in the CIS guide above include verifying subcontractors before payment, making any required deductions and filing monthly returns.

Your existing PAYE scheme becomes PAYE/CIS

You use HMRC’s process for setting up as a new employer to register as a contractor. CIS340 says HMRC opens a Contractor Scheme, with a PAYE scheme as well if requested. If you already run a payroll, that is not a second scheme alongside it.

Using the employer-registration route does not establish that your subcontractor is an employee. The employment-status assessment concerns the actual engagement.

If you already employ staff, GOV.UK says HMRC converts your existing PAYE scheme to PAYE/CIS. Your contractor responsibilities are added to that scheme.

The registration letter supplies your employer PAYE reference and Accounts Office reference. Your UTR is needed alongside those references when you verify a subcontractor, according to GOV.UK’s verification guidance.

Deemed contractors can be customers outside construction

A customer outside construction can still be a “deemed contractor” under CIS340 paragraph 2.2, so your payment can arrive with a CIS deduction.

The spending threshold for those customers does not apply to your trades business, according to CISR12040.

Stopping subcontracting means telling HMRC

You can pause subcontracting while continuing to use your employees. GOV.UK’s business-changes guidance provides an inactivity request for a temporary stop. If you stop using subcontractors completely, the guidance requires you to tell HMRC and stop filing monthly CIS reports.

For a business retaining employees, HMRC’s CISR31050 describes changing the combined scheme back to PAYE-only.

You can continue working as a subcontractor, with the usual questions about getting paid for construction work. The change concerns your role paying other subcontractors.

Which CIS roles does my business hold across its contracts, and have I registered for all of them?