Construction & Payroll FAQ's

Our top 5 FAQ's regarding the world of CIS and subcontractors.

1. What’s the difference between an employee and a subcontractor?

   Employees are on PAYE, with tax and National Insurance deducted through payroll. Subcontractors are usually paid under CIS with tax deducted at source. Employment status depends on working arrangements — not just what the contract says.

2. Do CIS subcontractors go through payroll?

   No. CIS subcontractors are not processed through PAYE payroll unless they are deemed employees for tax purposes. Instead, contractors file monthly CIS returns and provide payment and deduction statements.

3. What happens if I get employment status wrong?

   If HMRC decides a subcontractor should have been treated as an employee, the contractor can be liable for unpaid tax, National Insurance, interest, and penalties.

4. How can construction firms reduce compliance risk?

   • Review employment status regularly

   • Keep clear written contracts

   • Ensure payroll and CIS processes are up to date

   • Seek professional advice if unsure

5. What records must construction businesses keep?

   You should retain:

   CIS verification numbers

   • Monthly CIS returns

   • Subcontractor payment statements

   • Payroll records

   • Contracts and employment status documentation

   Records must generally be kept for at least three years.

If you have any questions regarding CIS, please don't hesitate to contact us!