A CIS contractor is a business or individual that pays other businesses or individuals (subcontractors) to carry out construction work, and as a result must operate the Construction Industry Scheme when making those payments.
Most contractors are businesses whose main trade is construction: builders, developers, civil engineering firms and specialist trade contractors such as electricians or plumbers who take on labour. However, the definition is wider than the trade itself suggests. A business whose primary activity is not construction can still become a deemed contractor if it spends £3 million or more a year on construction work (see the separate entry on deemed contractors).
Once a business is a contractor under CIS, it must:
- Register for CIS with HMRC before paying the first subcontractor.
- Verify each subcontractor's CIS status through the HMRC CIS online service before the first payment, so the correct deduction rate (0%, 20% or 30%) is applied.
- Deduct the correct percentage from the labour element of each payment and pass that amount to HMRC.
- File a CIS300 monthly return by the 19th of the following tax month, even in months where no payments are made (a nil return obligation reinstated from 6 April 2026).
- Issue a payment and deduction statement to each subcontractor for every payment made.
Since April 2026, contractors also carry a due-diligence duty under Finance Act 2026. If a contractor knew, or should have known, that a subcontractor in their supply chain had deliberately failed to comply with CIS obligations, the contractor can face a penalty of 20% of the payment under FA 2004 s.62A. This means re-verifying subcontractor status, running Companies House checks and confirming bank account details before each payment is no longer optional good practice: it is a legal safeguard.
See CIS for contractors: your monthly responsibilities and how to verify subcontractors under CIS for practical guidance.