CIS checklist for contractors: taking on and paying a subcontractor

The first time you pay another tradesperson to do part of your job, you become a contractor under the Construction Industry Scheme, and HMRC expects you to have registered before they start. From then on there is a deduction to work out on every payment and three things to do every month. This list is for the owner or the person who does the books in a small building or trades firm. Work through the first two groups once for each new subcontractor, the third each time you pay one, and the fourth every month, including the months when you pay nobody.

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CIS checklist: taking on a subcontractor

Tick each step as it is done. The ticks are kept in this browser only, so you can come back to the list; nothing is sent anywhere.

Before the subcontractor starts

Register with HMRC as a CIS contractor before you take on your first subcontractor Check the work is construction work that the scheme covers Check whether the person should be an employee, not a subcontractor Get the subcontractor's UTR, and their National Insurance number or company number

Verify, and agree how they will invoice

Verify the subcontractor with HMRC before the first payment Verify again anyone you have not put on a return in this tax year or the last two Unregistered subcontractor: tell them what the 30% rate costs on a typical invoice Ask for invoices that show labour and materials on separate lines Both VAT registered: expect a reverse charge invoice and account for the VAT yourself New-build house: expect VAT at 0% with no reverse charge, and still make the deduction

Each time you pay

Start from the invoice total and take off VAT, materials, consumables, job fuel and plant hire Deduct at the rate HMRC gave you from what is left, and pay the subcontractor the rest Record the gross amount, the materials and the deduction for every payment

Every month

Set three reminders: the 6th to gather, the 12th to draft and the 17th to file Give each subcontractor a payment and deduction statement within 14 days of the tax month end File the monthly return so it reaches HMRC by the 19th Pay the deductions to HMRC by the 22nd, or by the 19th if you pay by post Paid nobody this month: file a nil return or make an inactivity request

When something changes

Using subcontractors again after a break: file a return for that month Tell HMRC if you change address or business structure, or stop using subcontractors Appeal a penalty you disagree with within 30 days of the date on the notice

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A working list, not a certificate and not advice: the rule behind each step, with its source, is set out below.

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Before the subcontractor starts

Register with HMRC as a CIS contractor before you take on your first subcontractor. GOV.UK says you must register before you take on your first subcontractor, by following the process for setting up as a new employer. HMRC then sends a letter with your employer PAYE reference. Source: GOV.UK, What you must do as a CIS contractor: how to register, read 1 October 2026.

Check the work is construction work that the scheme covers. CIS covers most construction work to buildings, including site preparation, decorating and refurbishment. GOV.UK lists jobs outside it, among them architecture and surveying, scaffolding hire with no labour, carpet fitting and delivering materials. Source: GOV.UK, What you must do as a CIS contractor: who is covered, read 1 October 2026. The working is in New-build house at 0% VAT.

Check whether the person should be an employee, not a subcontractor. You must check, and each monthly return declares that the people on it are not employees; the wrong status can bring a penalty of up to £3,000. An employee is also owed statutory sick pay from the first full day off. A self-employed subcontractor is not. Source: GOV.UK, What you must do as a CIS contractor: overview and monthly returns, read 1 October 2026; our sick pay guide. The working is in Statutory sick pay from day one.

Get the subcontractor's UTR, and their National Insurance number or company number. To verify a sole trader you need their UTR and National Insurance number; for a company, its name, UTR and registration number. The details must exactly match what the subcontractor used to register with HMRC. Source: GOV.UK, What you must do as a CIS contractor: verify subcontractors, read 1 October 2026.

Verify, and agree how they will invoice

Verify the subcontractor with HMRC before the first payment. HMRC tells you whether they are registered and which rate to use: 20% for a registered subcontractor, 30% for one who is not, and no deduction for one with gross payment status. Source: GOV.UK, What you must do as a CIS contractor: verify subcontractors, read 1 October 2026. The working is in CIS deduction calculator.

Verify again anyone you have not put on a return in this tax year or the last two. GOV.UK says you must also verify subcontractors you have used before if you have not included them on a CIS return in the current or last 2 tax years. Their status may have changed since. Source: GOV.UK, What you must do as a CIS contractor: verify subcontractors, read 1 October 2026.

Unregistered subcontractor: tell them what the 30% rate costs on a typical invoice. On our test invoice of £3,000 labour and £800 materials, a registered subcontractor is paid £3,200 and an unregistered one £2,900. The £300 gap on one invoice is usually reason enough for them to register. Source: our saved test run in the CIS deduction calculator guide. The working is in CIS deduction calculator.

Ask for invoices that show labour and materials on separate lines. The deduction is worked out after materials the subcontractor paid for are taken off. With no split you can ask for receipts, and GOV.UK says to estimate the cost of materials if there is no evidence. Source: GOV.UK, What you must do as a CIS contractor: make deductions, read 1 October 2026. The working is in Free invoice template for electricians and builders (UK), with CIS and reverse charge.

Both VAT registered: expect a reverse charge invoice and account for the VAT yourself. The subcontractor's invoice shows the VAT but does not charge it, and you account for it on your own VAT return. On our test invoice £238 of VAT is shown and £1,000 is paid. If you are the end user, say so in writing. Source: HMRC, VAT reverse charge technical guide. The working is in Free invoice template for electricians and builders (UK), with CIS and reverse charge.

New-build house: expect VAT at 0% with no reverse charge, and still make the deduction. A subcontractor's labour and building materials on a new dwelling are zero-rated, so there is nothing to reverse. Nothing in the CIS rules turns on the VAT rate, so the deduction still comes off the labour. Source: HMRC, VAT Notice 708; GOV.UK CIS contractor guide. The working is in New-build house at 0% VAT.

Each time you pay

Start from the invoice total and take off VAT, materials, consumables, job fuel and plant hire. GOV.UK lists what comes off before the percentage: VAT, materials the subcontractor paid for directly, equipment now unusable, fuel except for travelling, plant hired for the job and the cost of making or prefabricating materials. Source: GOV.UK, What you must do as a CIS contractor: make deductions, read 1 October 2026. The working is in CIS deduction calculator.

Deduct at the rate HMRC gave you from what is left, and pay the subcontractor the rest. On an invoice of £4,000 labour and £1,500 materials at the 20% rate, £800 is deducted and £4,700 is paid. The £800 counts as an advance towards the subcontractor's tax and National Insurance. Source: GOV.UK CIS contractor guide; our worked invoice. The working is in New-build house at 0% VAT.

Record the gross amount, the materials and the deduction for every payment. You must keep the gross amount of each payment excluding VAT, the deductions and the cost of materials for at least 3 years after the end of the tax year. Failing to show the records can bring a fine of up to £3,000. Source: GOV.UK, What you must do as a CIS contractor: record keeping, read 1 October 2026.

Every month

Set three reminders: the 6th to gather, the 12th to draft and the 17th to file. The tax month ends on the 5th and the return is due on the 19th. Reminders on the 6th, 12th and 17th leave two days spare and cover the weeks when the person who does the books is not in. Source: our monthly routine in the CIS return guide. The working is in CIS monthly return.

Give each subcontractor a payment and deduction statement within 14 days of the tax month end. If you made deductions, the statement is due within 14 days of the end of each tax month: for the month to 5 June, by 19 June. The subcontractor needs it to claim the deductions against their own tax bill. Source: GOV.UK, What you must do as a CIS contractor: make deductions and pay subcontractors, read 1 October 2026. The working is in CIS deduction calculator.

File the monthly return so it reaches HMRC by the 19th. A return one day late brings a £100 penalty and one two months late a £200 penalty. At six months the penalty is £300 or 5% of the deductions on the return, whichever is higher, and 5% overtakes £300 once deductions pass £6,000. Source: GOV.UK, What you must do as a CIS contractor: file your monthly returns, read 1 October 2026. The working is in CIS monthly return.

Pay the deductions to HMRC by the 22nd, or by the 19th if you pay by post. GOV.UK says to pay every month by the 22nd, or the 19th by post, in the same way as PAYE and National Insurance. Interest and penalties may be charged on a late payment. Source: GOV.UK, What you must do as a CIS contractor: pay deductions to HMRC, read 1 October 2026.

Paid nobody this month: file a nil return or make an inactivity request. A month with no payments still needs a return showing 0, or a request telling HMRC you have temporarily stopped using subcontractors. Doing neither is a missed return, and the £100 penalty applies just the same. Source: GOV.UK, What you must do as a CIS contractor: file your monthly returns, read 1 October 2026. The working is in CIS monthly return.

When something changes

Using subcontractors again after a break: file a return for that month. An inactivity request lasts up to 6 months and can be renewed. GOV.UK says you must file a monthly return with payments when you start using subcontractors again, and that return ends the inactive period. Source: GOV.UK, What you must do as a CIS contractor: tell HMRC about changes, read 1 October 2026.

Tell HMRC if you change address or business structure, or stop using subcontractors. GOV.UK lists a change of address and a change of structure, for example from sole trader to limited company, as changes you must report. If you stop using subcontractors completely, tell HMRC and stop filing. Source: GOV.UK, What you must do as a CIS contractor: tell HMRC about changes, read 1 October 2026.

Appeal a penalty you disagree with within 30 days of the date on the notice. You can appeal through HMRC's online service or in writing, quoting your UTR and the payment reference on the notice. GOV.UK says you cannot appeal over the phone. Source: GOV.UK, What you must do as a CIS contractor: file your monthly returns, read 1 October 2026. The working is in CIS monthly return.

How to use the list

Keep one ticked copy of the first two groups with each subcontractor's file, alongside the verification result HMRC gave you, and one copy of the monthly group with each month's return. HMRC can ask to see CIS records at any time, and a dated list showing who was verified, what was deducted and when the statement went out is the quickest answer. If a step does not apply, such as the reverse charge when neither of you is VAT registered, tick it once you have checked.

A ticked list is a record that the steps were done, not proof that each was done properly. The list covers the points our guides and the official pages named above set out; it is not every duty a firm has. This page is general information, not legal advice.

Overlyft sets up AI assistants for trades and building firms: they prepare drafts for a person to approve. They do not tick off any of these steps for you, and you can do every one without them.