Can a Limited Company Register for CIS

At Towerstone Accountants we provide specialist CIS accountancy services for contractors, subcontractors, and construction businesses across the UK. We created this webpage for people working in construction who want clear guidance on CIS, including registration, deductions, refunds, and common compliance tasks, without jargon. Our aim is to help you stay compliant with HMRC, avoid costly errors, and keep your records in good order.

This is a question I am asked constantly, often by directors who have recently set up a limited company or who have been trading for some time but are suddenly being told by a contractor that they need to be CIS registered. There is often uncertainty about whether CIS only applies to sole traders, whether companies are treated differently, or whether registration happens automatically once a company starts operating in construction.

The short answer is yes, a limited company can register for CIS, and in many cases it must. The longer answer is where the detail sits, because how CIS applies to a limited company depends on what the company does, how it is paid, and whether it is acting as a contractor, a subcontractor, or both.

In this article I am going to explain exactly how CIS works for limited companies. I will cover when a limited company needs to register, how the registration process works, what the ongoing obligations are, how CIS deductions are handled for company tax purposes, and the common mistakes I see that cause unnecessary problems. My aim is to give you clarity rather than generic guidance, so you can be confident you are doing the right thing.

Understanding CIS in the context of a limited company

The Construction Industry Scheme is often talked about in the context of self employed subcontractors, but it applies just as much to limited companies. HMRC does not exclude companies from CIS simply because they are incorporated.

CIS is concerned with the nature of the work being carried out and the payment relationship, not the legal structure alone. If a limited company is carrying out construction work or paying others to do so, CIS can apply.

This is an important mindset shift for directors who assume incorporation changes everything. In some areas it does, but CIS is not one of them.

When a limited company needs to register for CIS

A limited company may need to register for CIS in two different capacities.

It may need to register as a subcontractor if it carries out construction work for other businesses and is paid for that work.

It may need to register as a contractor if it pays other businesses or individuals to carry out construction work on its behalf.

Some limited companies fall into both categories, which is more common than many directors realise.

Understanding which role or roles apply to your company is the first step in determining whether CIS registration is required.

Limited companies acting as subcontractors

If your limited company provides construction services to a contractor, such as building work, electrical installation, plumbing, groundworks, or similar activities, it is treated as a subcontractor under CIS.

In this situation the contractor paying your company is required to verify your company with HMRC and apply the appropriate CIS deduction rate unless your company has gross payment status.

For this to happen smoothly your limited company must be registered with HMRC as a CIS subcontractor. If it is not, the contractor will be instructed to deduct tax at the higher 30 percent rate.

From a cash flow perspective this can be painful, which is why early registration matters.

Limited companies acting as contractors

If your limited company pays subcontractors to carry out construction work, even if construction is not the company’s main activity, it may need to register as a CIS contractor.

This catches out property development companies, construction project management firms, and some landlords operating through companies.

Once registered as a contractor the company becomes responsible for verifying subcontractors, deducting CIS where required, submitting monthly returns, and paying deductions to HMRC.

This is not optional. If the company meets the definition of a contractor, HMRC expects registration and compliance.

Limited companies that are both contractor and subcontractor

It is entirely possible, and quite common, for a limited company to be both a contractor and a subcontractor.

For example a building company may carry out work for a larger contractor while also engaging electricians and plumbers on its own projects.

In this case the company must register for CIS in both roles. This allows it to be verified correctly when it is paid and to operate the scheme correctly when it pays others.

Failing to register in both capacities is a frequent source of errors.

How a limited company registers for CIS

A limited company cannot register for CIS until it has been fully incorporated and issued with a Unique Taxpayer Reference by HMRC.

Once the company has a UTR it can register for CIS online or by phone. The registration process involves confirming whether the company is registering as a contractor, a subcontractor, or both.

For contractor registration HMRC will also link CIS to the company’s PAYE scheme. This applies even if the company has no employees at the time, which often surprises directors.

In practice I always advise companies to take a moment to consider the wider setup before registering, because CIS, PAYE, and Corporation Tax all become linked at this stage.

CIS registration and PAYE for limited companies

One of the most misunderstood areas is the link between CIS and PAYE for limited companies.

When a company registers as a CIS contractor, HMRC expects it to have a PAYE scheme so that CIS deductions can be reported and paid over. This does not mean subcontractors are employees, but it does mean PAYE infrastructure is used for reporting.

This can result in companies receiving PAYE correspondence and filing obligations earlier than expected, even if the only payments being made are to subcontractors.

Handled properly this is manageable, but it does need to be understood.

CIS deduction rates for limited company subcontractors

Limited companies are subject to the same CIS deduction rates as other subcontractors.

If the company is registered for CIS, the standard deduction rate of 20 percent applies.

If the company is not registered, the higher rate of 30 percent applies.

If the company has gross payment status, no deductions are made at all.

These deductions apply only to the labour element of the payment, not to materials or VAT.

Gross payment status for limited companies

Limited companies can apply for gross payment status under CIS, which allows them to be paid in full without deductions.

To qualify the company must meet turnover thresholds, have a good compliance history, and be carrying on a genuine construction business.

Gross payment status can significantly improve cash flow, but it comes with responsibility. HMRC regularly reviews compliance and can withdraw gross status if returns are late or taxes go unpaid.

I always stress to directors that gross status is a privilege rather than a right.

How CIS deductions are treated for Corporation Tax

This is an area where limited companies differ from sole traders.

CIS deductions suffered by a limited company are not a final tax. They are treated as tax paid on account.

When the company’s Corporation Tax return is prepared, CIS deductions are offset against the Corporation Tax liability. In some cases they can also be set against PAYE liabilities.

If deductions exceed the Corporation Tax due, the company may be due a refund.

This process relies on accurate CIS statements, which must be retained and reconciled properly.

CIS refunds for limited companies

Limited companies can and often do receive CIS refunds, particularly in early years when profits are lower or where deductions have been high.

However refunds are not automatic. They usually arise through the Corporation Tax return or through PAYE offsets.

I regularly see companies sitting on CIS credits simply because nobody has reviewed the position or claimed the refund.

Good bookkeeping and periodic review are essential here.

CIS and VAT for limited companies

CIS and VAT are separate systems but they interact in day to day cash flow.

VAT is never subject to CIS deductions. Even if 20 percent is deducted from labour, VAT is paid in full.

This means a limited company may receive reduced net income due to CIS while still having to account for VAT to HMRC.

Choosing the right VAT scheme and managing payment timing becomes particularly important in this situation.

Common mistakes limited companies make with CIS

There are several recurring issues I see.

Companies assume CIS does not apply because they are incorporated, register only as subcontractors when they are also contractors, fail to register at all until deductions start appearing, or misunderstand how deductions are reclaimed.

Another frequent issue is directors confusing CIS with payroll and assuming deductions relate to personal tax rather than company tax.

These mistakes are usually rooted in misunderstanding rather than intent, but they can still be costly.

What happens if a limited company does not register

If a limited company that should be registered for CIS does not do so, HMRC does not simply overlook it.

Contractors may deduct at the higher rate, returns may be required retrospectively, and penalties can be issued.

For companies acting as contractors, failure to register and submit returns can result in automatic monthly penalties that escalate quickly.

Late registration almost always creates more work than registering correctly at the outset.

Keeping records for CIS in a limited company

Good record keeping underpins everything.

Limited companies should retain invoices, CIS deduction statements, verification records, and monthly return confirmations.

These records support Corporation Tax returns, PAYE reconciliations, and any future HMRC queries.

Digital systems make this far easier and reduce the risk of missing information.

CIS and director remuneration

CIS does not apply to payments made to directors for their role as directors.

Director salaries are always dealt with through PAYE. CIS only applies to payments for construction work carried out as a subcontractor.

This distinction matters where directors are also hands on in the business. Mixing roles without clarity can create compliance issues.

How CIS fits into the wider company tax picture

CIS should not be viewed in isolation.

For a limited company it sits alongside Corporation Tax, PAYE, VAT, and Companies House obligations.

When these systems are aligned properly, CIS becomes predictable and manageable. When they are treated separately, confusion and missed opportunities follow.

How I advise limited companies on CIS

When I advise limited companies on CIS my starting point is always understanding what the company actually does.

Once the role is clear, registration becomes straightforward, systems can be set up correctly, and the tax treatment can be planned rather than guessed.

This approach avoids unnecessary deductions, missed refunds, and compliance stress.

Final thoughts

Yes, a limited company can register for CIS, and in many cases it must. Incorporation does not remove CIS obligations, it simply changes how the deductions are accounted for later.

From my experience the companies that struggle most with CIS are not those with complex structures, but those who assume CIS only applies to individuals.

If you take the time to understand your role, register correctly, and keep good records, CIS becomes another manageable part of running a construction business rather than a recurring source of confusion.

You may also find our guidance on how to register for cis and does a limited company need cis registration helpful when dealing with related CIS questions. For a broader overview of CIS rules, compliance, and support, you can visit our cis guidance hub.