Does a Limited Company Need CIS Registration

Find out when a limited company must register for CIS, including rules for contractors and subcontractors, gross payment status and HMRC compliance.

Does a Limited Company Need to Be CIS Registered?

If you run a limited company in the UK construction industry, you may have heard about the Construction Industry Scheme (CIS) and wondered whether it applies to you. CIS is not just for sole traders and partnerships — limited companies can also fall within its scope depending on the type of work they do and how they operate.

In this article, we explain when and why a limited company needs to be CIS registered, how to register, and the consequences of failing to comply with the scheme. Whether you're a contractor or a subcontractor, understanding your responsibilities under CIS is essential for staying on the right side of HMRC and managing your tax obligations correctly.

What Is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme is a tax scheme introduced by HMRC to regulate payments from contractors to subcontractors for construction work in the UK. Under the scheme:

  • Contractors are required to deduct tax at source from payments made to subcontractors

  • These deductions are then passed on to HMRC and count as advance payments towards the subcontractor’s tax and National Insurance liabilities

  • The standard deduction is 20 per cent for registered subcontractors, 30 per cent for those not registered, and 0 per cent for those with gross payment status

The scheme helps HMRC reduce tax evasion in the construction sector and applies to most types of construction work, including building, demolition, repairs, decorating, and site preparation.

Does CIS Apply to Limited Companies?

Yes, limited companies can and often must register for CIS, depending on their role in the construction supply chain.

There are two main scenarios where CIS applies:

  1. Your limited company is a contractor

  2. Your limited company is a subcontractor

In some cases, your company may be both.

When Does a Limited Company Need to Register as a Contractor?

Your limited company must register as a contractor under CIS if it:

  • Pays subcontractors to carry out construction work

  • Spends more than £3 million on construction within a 12-month period, even if construction is not your main activity (this applies to businesses like property developers and large commercial enterprises)

Contractors must:

  • Verify subcontractors with HMRC

  • Deduct the appropriate amount of tax (20 per cent, 30 per cent or 0 per cent)

  • Submit monthly CIS returns

  • Provide subcontractors with monthly deduction statements

  • Pay deductions to HMRC by the 22nd of each month if paying electronically

Failure to register and submit returns on time can result in penalties from HMRC, so it is essential to set up your company correctly.

When Does a Limited Company Need to Register as a Subcontractor?

Your company needs to register as a subcontractor under CIS if it is being paid to carry out construction work for another contractor.

While registration as a subcontractor is technically optional, failure to register means you will have tax deducted at 30 per cent instead of the standard 20 per cent. This higher deduction can severely impact your company’s cash flow, especially if you operate on tight margins.

To avoid this, it is recommended that all subcontracting companies register with CIS as soon as possible.

Can a Limited Company Apply for Gross Payment Status?

Yes. A limited company acting as a subcontractor can apply for gross payment status, which allows it to be paid in full by contractors without any CIS deductions.

To qualify, your company must meet certain conditions:

  • Be based in the UK

  • Have a good tax compliance record (no late payments or returns)

  • Have a minimum turnover (excluding VAT and materials) of £30,000 for a sole director or £100,000 for a company with multiple directors

  • Operate a bank account in the business name

If your application is successful, you will still need to declare and pay tax through your corporation tax return, but you benefit from improved cash flow and reduced admin.

How to Register a Limited Company for CIS

Registering your limited company for CIS can be done online through HMRC's website. The steps are:

  1. Ensure you have a Government Gateway account

  2. Register your company for PAYE (if you employ staff)

  3. Log in to HMRC online services and select CIS

  4. Choose to register as a contractor, subcontractor, or both

Once registered, you will receive a Unique Taxpayer Reference (UTR) for CIS purposes, and you can begin verifying subcontractors or providing your details to contractors.

HMRC will also send information on how to file returns, make payments and apply for gross payment status if needed.

CIS Responsibilities for Limited Companies

Whether you are a contractor or subcontractor, being CIS-registered comes with certain ongoing obligations:

  • Contractors must verify subcontractors, file monthly returns and provide deduction statements

  • Subcontractors must keep accurate records of all payments and deductions, and ensure they reclaim tax correctly through their company tax returns

  • Companies with gross payment status must maintain clean tax records or risk losing their status

Failure to comply can lead to financial penalties, higher tax deductions and HMRC investigations.

Common Mistakes to Avoid

  • Not registering as a subcontractor and being subject to 30 per cent deductions

  • Missing CIS return deadlines and receiving automatic late filing penalties

  • Confusing CIS with PAYE — they are separate schemes and must be managed individually

  • Incorrectly claiming materials — only actual materials, not labour or overheads, should be excluded from the deduction

  • Failing to update HMRC when circumstances change (e.g. switching from sole trader to limited company)

Good record-keeping and professional advice can help avoid these issues.

Final Thoughts

If your limited company is involved in construction work — whether hiring subcontractors or being hired as one — then CIS registration is often required. Contractors must register by law, and subcontractors benefit financially from being registered to avoid higher tax deductions.

Even if you are a small company or newly incorporated, it is worth checking your CIS obligations early to avoid cash flow issues or penalties. HMRC provides detailed guidance, but working with a qualified accountant or CIS specialist can help ensure you remain fully compliant while focusing on running your business.