A limited company subcontractor is a private limited company (typically a personal service company or small construction firm) that is paid by contractors for construction work, with CIS deductions applied to the company's labour income and paid to HMRC by the contractor.

Operating through a limited company rather than as a sole trader changes several aspects of the CIS position, in ways that are both more advantageous and more administratively demanding:

  • Real-time reclaim via EPS. Unlike sole traders (who wait until after the tax year to reclaim via Self Assessment), a limited company can reclaim CIS deductions suffered in real time by offsetting them against PAYE and employer NIC liabilities owed on the company's monthly Employer Payment Summary. If deductions suffered exceed PAYE/NIC due, HMRC repays the balance, typically within 25 working days. This is a major cash-flow advantage over the sole-trader route.
  • Verification. When a contractor verifies a limited company, they use the company's UTR and its Companies House registration number. The director's personal UTR is separate and is not used for CIS verification.
  • GPS turnover test. A limited company needs net CIS turnover of at least £30,000 per director or £100,000 total (excluding VAT and materials) to qualify for GPS.
  • Corporation Tax, not Self Assessment. The company pays Corporation Tax at 25% (main rate, profits above £250,000) or 19% (small profits rate, below £50,000) rather than income tax. Directors extract profit via a mix of salary and dividends: dividend tax rates in 2026/27 are 10.75% (basic), 35.75% (higher) and 39.35% (additional rate).
  • Finance Act 2026 liability. Where a director knowingly makes a payment knowing a connected subcontractor has deliberately failed to comply with CIS, they may face personal exposure under HMRC's officer-liability rules (separate from the company's FA 2004 ss.62A/62B penalties). Active due diligence on every payment is essential.

See CIS: sole trader or limited company? and how the EPS reclaim works for limited companies for the full comparison.