If you're about to pay subcontractors for construction work for the first time, here's what registering as a CIS contractor involves and what to set up before your first payment.
1 July 2026
Taking on your first subcontractor is often the point at which a business realises it needs to deal with the Construction Industry Scheme properly, rather than just being aware it exists. If you're about to pay someone for construction work and you haven't registered as a CIS contractor yet, here's what's involved before that first payment goes out.
You need to register as a CIS contractor if your business pays subcontractors for construction work. This isn't limited to building firms: a business in another sector that spends heavily on construction, for example a retailer building out its own stores, can fall under the definition of a contractor for CIS purposes too, even though construction isn't its main trade.
If you're unsure whether your work counts as "construction operations" under the scheme, it's worth checking HMRC's definition directly, since it covers a broad range of site preparation, construction, alteration, repair, and demolition work, along with some closely related services.
Contractors register for CIS with HMRC, typically as part of registering the business for PAYE if you don't already have a PAYE scheme running, since CIS registration usually sits alongside it. Once registered, you're set up to verify subcontractors, apply deductions, issue statements, and file your monthly CIS300 returns.
Give yourself time before you need to make your first payment. Registration isn't instant, and you're expected to have your CIS obligations in place, including verifying your first subcontractor, before that payment goes out.
Once registered, there are a few things worth setting up before you pay anyone:
A process for verifying subcontractors. Every subcontractor needs to be verified with HMRC before their first payment, which tells you whether to apply 0%, 20%, or 30%. See our guide on verifying a subcontractor with HMRC for the details.
A clear understanding of the deduction rates. Knowing which of the three rates applies to which subcontractor, and why, avoids a lot of after-the-fact correction.
A way to separate materials from labour. The deduction only applies to labour, not to genuine materials costs, so you need a way of capturing that split per payment from day one. Our guide on materials vs labour covers what counts.
A calendar built around tax months, not calendar months. CIS runs on tax months from the 6th to the 5th, which affects both when payments group together and when your deadlines fall. Our guide on CIS tax months explains why this trips up so many new contractors.
A routine for statements and returns. You'll need to issue Payment and Deduction Statements within 14 days of each tax month end, and file your CIS300 return by the 19th of the following month.
New contractors most often go wrong by treating CIS as a one-off setup task rather than a monthly obligation, registering, verifying the first subcontractor, and then losing track of the ongoing filing and statement deadlines once the busy season hits. It's also common to underestimate how much the calendar-month versus tax-month distinction affects deadlines until a return doesn't match up cleanly.
If you're bringing in subcontractors through a specific trade, our per-trade guides, for example groundworks contractors, cover some of the volume and consolidation issues that come up once you're paying several subcontractors a month rather than just one.
If you already run job-management or invoicing software, it's worth checking early on whether it produces CIS statements at all, since many trade-focused platforms are built for scheduling and quoting and simply don't cover the CIS side. Our software-specific guides, such as the one for ServiceM8, cover what to do when your existing system leaves a gap here.
Once you're registered and verifying subcontractors correctly, the remaining monthly work is producing accurate statements and CIS300 totals. Our CIS statement generator takes a spreadsheet of what you paid each subcontractor and their verified status, and produces every statement plus your CIS300 totals in one pass, so you're not building that process from scratch as your subcontractor list grows.
See our guides hub for the full set of CIS guides, organised by topic, trade, and software.