How Do I Deregister from CIS When I Stop Working in Construction?

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 deductions, refunds, verification, and monthly return responsibilities, without jargon. Our aim is to help you stay compliant with HMRC, avoid penalties, and keep your cash flow and records under control.

Stopping work in construction often brings a sense of relief, particularly if you are moving into a different line of work, retiring, or winding down a business that has been running for years. What I see far too often, though, is people assuming that once the work stops, the tax obligations stop automatically as well. Under the Construction Industry Scheme, that is not the case. If you are registered for CIS and you stop working in construction, you need to actively deregister to avoid ongoing compliance issues.

In this article I will explain, in practical terms, how to deregister from CIS, when you should do it, what you need to deal with before and after deregistration, and the common mistakes that can cause problems long after construction work has finished. I will cover the process for sole traders, limited companies, and contractors, because the steps and implications can differ slightly depending on how you operate.

Why deregistering from CIS matters

CIS registration brings with it ongoing obligations. HMRC expects returns to be filed, even if no work has taken place, unless you tell them otherwise. If you remain registered after stopping construction work, you can find yourself receiving penalties for missing monthly CIS returns or queries about activity that no longer exists.

From experience, these penalties are frustrating because they are entirely avoidable. HMRC does not know you have stopped working in construction unless you tell them, and they will continue to expect compliance until you formally deregister.

Deregistering properly brings clarity. It tells HMRC that CIS no longer applies to you and allows you to focus on any remaining tax obligations without the noise of unnecessary CIS administration.

When you should deregister from CIS

You should deregister from CIS when you are certain that you have stopped carrying out construction work that falls within the scheme.

This might be because you have changed industry, closed a business, retired, or moved into a role that is no longer classed as construction for CIS purposes. It can also apply if you were registered as a contractor but no longer pay for construction work.

Timing matters. Deregistering too early, while there are still CIS payments or obligations outstanding, can cause complications. Deregistering too late can result in penalties.

In practice, I usually recommend waiting until the final CIS payment has been received or made and the final return has been submitted, then deregistering promptly.

Deregistering as a CIS subcontractor

If you are registered as a CIS subcontractor and you stop working in construction, deregistering is relatively straightforward.

You need to contact HMRC and tell them that you no longer work in construction and want to deregister as a CIS subcontractor. This can be done online through your HMRC account or by phone.

When deregistering, HMRC may ask for:.

• Your Unique Taxpayer Reference

• Your National Insurance number or company details

• The date you stopped working in construction

Once deregistered, contractors should no longer apply CIS deductions to any future payments, although in most cases there should not be any if you have genuinely stopped working in the sector.

Deregistering as a CIS contractor

If you are registered as a CIS contractor, the process involves a bit more care.

Contractors have an obligation to submit monthly CIS returns, even if no subcontractors are paid in a given month, unless HMRC has been informed that there is no activity.

Before deregistering, you must ensure that:.

• All outstanding CIS returns have been submitted

• All CIS deductions have been paid to HMRC

• There are no unresolved discrepancies

Once these are dealt with, you can contact HMRC to deregister as a contractor, stating that you no longer make payments for construction work.

Failing to submit final returns before deregistration is one of the most common causes of problems later.

Final CIS returns and nil returns

One point that causes confusion is the requirement for final returns.

If you have stopped working part way through a tax month, you still need to submit a return for that period, showing the final payments made or confirming that no payments were made.

If there were months with no activity before you deregistered, nil returns may be required unless HMRC was informed in advance.

From experience, dealing with these final submissions properly is key to a clean exit from CIS.

What happens to CIS suffered after deregistration

Deregistering from CIS does not mean CIS deductions already suffered disappear.

If you are a sole trader, any CIS deducted before you stopped working in construction is still offset against your tax through your Self Assessment return. You must still file a tax return for the year in which you traded, even if you deregister part way through the year.

If you are a limited company, CIS deductions suffered remain on your HMRC account and are offset against PAYE liabilities or otherwise dealt with in the usual way.

This is why deregistering should be seen as an administrative step, not the end of all tax interaction.

Deregistering when you close a business

If you are closing a business entirely, deregistering from CIS is only one part of the process.

Sole traders need to notify HMRC that they have stopped trading, file a final Self Assessment return, and settle any outstanding tax.

Limited companies may need to go through formal strike off or liquidation, file final accounts, and deal with corporation tax, PAYE, and VAT deregistration where applicable.

CIS deregistration fits into this wider picture and should be coordinated with other closures.

Deregistering when changing business structure

Another situation I see regularly is people changing structure, for example moving from sole trader to limited company.

In these cases, the old CIS registration needs to be deregistered and a new one set up under the new structure. HMRC treats these as separate entities.

Failing to do this can lead to deductions being applied incorrectly or CIS records becoming muddled.

Informing contractors and clients

Once you deregister from CIS, it is sensible to inform any contractors or clients you have worked with, particularly if there are final payments involved.

This helps avoid confusion and ensures that no deductions are applied incorrectly.

Clear communication also reduces the risk of contractors reporting payments incorrectly to HMRC.

HMRC confirmation and keeping evidence

After deregistering, HMRC should confirm that your CIS registration has been closed.

It is important to keep this confirmation, along with records of final returns and payments. If HMRC later queries CIS activity, having evidence of deregistration makes resolving issues much easier.

From experience, keeping these records for several years is wise, even if you are no longer in construction.

Common mistakes when deregistering from CIS

There are a few recurring mistakes that cause problems.

One is assuming that stopping work automatically deregisters you. It does not.

Another is deregistering before submitting final returns, which can trigger penalties or HMRC letters.

I also see people deregister as subcontractors but forget they are registered as contractors as well, which leaves obligations outstanding.

Understanding exactly what you are registered for is essential.

What if you return to construction later

If you deregister from CIS and later return to construction, you can re register.

There is no penalty for deregistering and re registering, provided it is done correctly. However, you will need to go through the registration process again, and contractors will need to verify you.

This flexibility is useful, but it reinforces the importance of keeping records and understanding your status.

HMRC compliance checks after deregistration

Deregistering does not prevent HMRC from checking earlier periods.

HMRC can still review CIS returns, deductions, and tax returns for years when you were active. This is why accurate records and correct final submissions are so important.

In practice, clean deregistration often reduces the likelihood of future queries, because it signals that matters have been concluded properly.

When professional help is useful

While deregistering from CIS is not technically complex, it often sits alongside other changes, such as stopping trading or restructuring a business.

In these cases, having professional advice can help ensure everything is done in the right order and nothing is missed. From experience, the cost of advice is usually far less than the cost of fixing mistakes later.

Planning for a clean exit

From a forward looking perspective, the key to deregistering from CIS smoothly is planning.

Know when your final work will take place, keep records of final payments, submit all required returns, and then deregister promptly. Treat it as part of closing a chapter rather than an afterthought.

Final thoughts

Deregistering from CIS when you stop working in construction is an essential step, not an optional one. It protects you from ongoing obligations, unnecessary penalties, and confusing correspondence from HMRC.

The process itself is straightforward, but the detail around timing, final returns, and remaining tax obligations matters. In my experience, the people who have the easiest time are those who deal with CIS deregistration proactively rather than waiting for HMRC to chase them.

If you are leaving construction behind, taking the time to deregister properly brings closure and clarity, allowing you to move on without loose ends following you into the future.

You may also find our guidance on How do I change my CIS registration details and how to register for cis helpful when dealing with related CIS questions. For a broader overview of CIS rules, compliance, and support, you can visit our cis guidance hub.