Can a Limited Company Register for CIS

Introduction

The Construction Industry Scheme (CIS) is an HMRC system designed to regulate how payments are made between contractors and subcontractors in the construction sector. It ensures that tax is deducted correctly before payments are made.

Limited companies that work as contractors or subcontractors can register for CIS. In fact, most companies operating in construction must register to comply with HMRC rules. Whether you are required to register depends on how your company operates within the supply chain.

When a limited company should register for CIS

Your company must register for CIS if it meets either of the following conditions:

You operate as a contractor.
Your company pays other businesses or individuals to carry out construction work. Contractors must register for CIS before making any payments to subcontractors.

You operate as a subcontractor.
Your company is paid by another business to perform construction work. Subcontractors must also register to ensure they receive payments with the correct tax deductions.

Some limited companies act as both contractors and subcontractors, in which case they must register under both roles.

Example

A limited company called ABC Builders Ltd takes on large housing projects. It hires electricians and plumbers as subcontractors while also working as a subcontractor for a main contractor. ABC Builders Ltd must register for CIS as both a contractor and a subcontractor.

What construction work is covered by CIS

The CIS applies to most types of construction work carried out in the UK, including:

Building and civil engineering projects.

Repairs, maintenance, and refurbishments.

Site preparation and demolition.

Installation of systems such as heating, lighting, and plumbing.

Painting and decorating.

Some work, such as professional services (architecture, surveying, or scaffolding hire), falls outside CIS, but most physical construction activities are included.

How to register your limited company for CIS

Registering for CIS is straightforward, and you can complete the process online through HMRC.

Step 1: Ensure your company is registered with HMRC

Your limited company must already be registered with HMRC for Corporation Tax. If you employ staff or pay yourself through PAYE, you must also be registered as an employer.

Step 2: Gather your details

You will need:

Your company’s Unique Taxpayer Reference (UTR).

Your Company Registration Number (CRN).

Your National Insurance number if you are a director.

Your company’s VAT registration number (if applicable).

Your business bank account details.

Step 3: Register online

To register as a contractor or subcontractor, visit the CIS section of the HMRC website and follow the registration steps. You can register at the same time as setting up your PAYE scheme if you plan to employ staff.

Once registered, HMRC will confirm your company’s CIS status and issue reference details to include on your payment and deduction statements.

Step 4: Verify subcontractors (for contractors only)

If your company pays subcontractors, you must verify each one with HMRC before paying them. This process determines whether you should deduct tax at 20 percent, 30 percent, or make gross payments (no deductions).

Verification is done through your accounting software or HMRC’s online service.

CIS tax deduction rates for limited companies

When working as a subcontractor, your limited company may have tax deducted from payments received. The deduction rate depends on your CIS registration status:

Registered subcontractor: 20 percent tax deduction.

Unregistered subcontractor: 30 percent deduction until registered.

Gross payment status: No deduction at source; you pay tax through your Corporation Tax return.

To qualify for gross payment status, your company must have a good compliance history and meet HMRC’s turnover and business test requirements.

Example

XYZ Construction Ltd is registered for CIS as a subcontractor. Its main contractor verifies the company and deducts 20 percent tax from each payment. The deducted tax is offset against XYZ Construction Ltd’s Corporation Tax bill at the end of the year.

Monthly CIS returns for contractors

If your limited company acts as a contractor, you must file monthly CIS returns to HMRC. These returns detail:

All payments made to subcontractors during the month.

The amount of tax deducted from each payment.

Verification numbers for each subcontractor.

The return must be filed by the 19th of each month, covering payments made in the previous tax month (ending on the 5th).

You can submit returns online through accounting software or directly via HMRC’s CIS portal.

Failing to submit your return on time can result in automatic penalties starting at £100.

CIS record keeping for limited companies

Your company must keep detailed records of:

Subcontractor invoices and payment statements.

Tax deductions made and paid to HMRC.

Verification results for each subcontractor.

CIS returns submitted.

Records must be kept for at least three years and made available if HMRC requests them. Accurate record keeping ensures compliance and makes year-end tax reconciliation easier.

How CIS affects your limited company’s tax

When your company receives payments under CIS, tax deducted at source is treated as an advance payment towards your Corporation Tax or PAYE liability.

Your accountant will include the deducted amounts in your company’s accounts, ensuring they are correctly offset against your tax bill. If too much tax has been deducted, your company can claim a refund from HMRC.

Example

A subcontractor company has £8,000 in CIS deductions during the year. When it submits its Corporation Tax return, it owes £7,500 in Corporation Tax. HMRC refunds the £500 overpayment once the return is processed.

Advantages of registering for CIS as a limited company

Ensures compliance with HMRC and avoids higher 30 percent deductions.

Builds trust with contractors and clients.

Allows eligible companies to apply for gross payment status.

Simplifies year-end tax reconciliation.

Common mistakes to avoid

Failing to register before starting construction work.

Paying subcontractors without verifying their CIS status.

Missing monthly CIS return deadlines.

Keeping incomplete or inaccurate records.

Confusing PAYE and CIS deductions.

An accountant familiar with the construction industry can manage CIS compliance, file monthly returns, and ensure all deductions are correctly recorded.

Example scenario

BrightBuild Ltd is a newly formed construction company. Before starting its first project, the directors register the company for CIS as both a contractor and subcontractor. Their accountant verifies each subcontractor, files monthly CIS returns, and ensures all tax deductions are recorded. By staying compliant from the start, BrightBuild Ltd avoids penalties and secures a strong relationship with its main contractor.

Conclusion

A limited company can and often must register for the Construction Industry Scheme if it operates in the construction sector. Whether acting as a contractor or subcontractor, registration ensures the correct handling of tax deductions and compliance with HMRC requirements.

Registering early, keeping detailed records, and submitting monthly CIS returns on time will keep your company compliant and financially efficient. Working with an accountant can simplify the process, ensuring your company meets its obligations while focusing on completing successful construction projects.