When are you a
Subcontractor under CIS?
CIS uses its own special definition of the term ‘subcontractor’.
So even if you don’t normally think of yourself as a subcontractor, you could be treated as one under CIS.
You are a subcontractor if…
Under the rules of CIS, you’re a subcontractor if you agree to do construction work for a contractor. It doesn’t matter how you actually carry out the work – you could do it yourself, get your employees to do it, use your own subcontractors or make some other arrangement.
Subcontractors can be self-employed individuals, any type of business, or other bodies and organisations.
Some examples of construction industry subcontractors include:
- Sole traders, partnerships, and companies that do construction work for contractors
- Labour agencies and staff bureaux that use their own workers to do construction work for a contractor – or that supply (but not just introduce) workers to a contractor
- Gang leaders who contract to do work for a contractor and are paid for the work done by their gang
- Foreign businesses paid to do construction work in the UK, or in UK territorial waters
- Local authorities and public bodies that do construction work for someone else
Good To Know
Labour Agencies
If your business is a labour agency that supplies construction workers to contractors, you’re a subcontractor if the workers are contracted to your agency. But if you just introduce the workers to the contractor who then contracts with them directly, you’re not a subcontractor.
There are special CIS rules for agency workers in the construction industry.
Gang Leaders
If you’re a gang leader and you’re paid by contractors for construction work that your gang members do then you’re a subcontractor. But if a contractor makes a separate agreement directly with one of your gang members then that gang member becomes the subcontractor,
Local Authorities and Public bodies
Local authorities – and their direct services of labour organisations – can be construction industry subcontractors if they do construction work for someone else. Public bodies and their subsidiaries can be subcontractors too.
Are you a subcontractor or employee?
CIS only applies to construction workers who are self-employed – it doesn’t cover employees. So if your contract is a ‘contract of employment’ then you’re an employee and CIS doesn’t apply to that contract. Instead, you’ll pay any tax you owe through PAYE (Pay As You Earn).
Employment status – whether you’re self-employed or an employee – is covered by general law. Your own employment status will depend on the terms of each engagement you undertake. It’s quite possible to work as a self-employed subcontractor on one contract and then as an employee on the next.
When you’re working for someone else, it’s important to know whether you’re working as a self-employed contractor or as an employee.
When are you both a contractor and subcontractor
You may well be a contractor and a subcontractor at the same time. It’s quite commonplace for construction businesses to be paid by a contractor for doing construction work, while at the same time paying their own subcontractors to do work for them.
When you’re being paid by a contractor to do construction work you’re a subcontractor and you must follow the CIS rules for subcontractors. When you’re paying your own subcontractors you’re a contractor and you must follow the CIS rules for contractors.
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