CIS sub-contractors should be registered with HMRC to ensure that the tax deducted
from the invoiced amount is correct. The tax deducted is included in the annual tax calculation of the sub-contractor (subject
normally to completion of a self-assessment return) and, with consideration of the personal allowance of tax-free
income, can often result in a repayment.
Failure to register as a CIS/self-employed contractor can result in:
Losing possible refunds of overpaid tax. Enquiries and subsequent investigations as your UTR/payment details are
submitted to HMRC by your contractor. Suffering a higher deduction (30%) by the contractor due to not registering
for CIS. Penalties for late submissions to HMRC.
If the sub-contractor also employs other sub-contractors
he may be deemed a contractor and should maintain a position of a contractor with HMRC and deduct the appropriate amount of
tax on payments to sub-contractors. This is a complex area and requires confirmation of status as an employer/contractor
and subsequent (normally) registration with HMRC for a PAYE/CIS scheme.
There is considerable information
on requirements for CIS registration at www.hmrc.gov.uk