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    • Contractor and Subcontractor Accounts

    Are you paying subcontractors for construction work?

     

    A ‘mainstream contractor’ is any business or organisation that pays subcontractors for construction work. This includes construction companies, building firms, local authorities, government departments, and businesses. Organisations that have spent more than £3 million on construction work in the previous 12 months are known as ‘deemed contractors.’

    In contrast, a subcontractor is a business that carries out construction work for a contractor. Many companies act as contractors when they pay others for work and as subcontractors when they are paid for work by another business, requiring them to follow the relevant rules for each role.

    Understanding Your Status: Contractor or Subcontractor?

    Your employment status significantly impacts your tax obligations and entitlements:

    • Contractors typically engage subcontractors to complete work and have responsibilities under the Construction Industry Scheme (CIS)
    • Subcontractors provide services to contractors and receive payments after CIS deductions
    • Self-employed individuals may work as either contractors or subcontractors, but maintain different responsibilities to employees

    According to HMRC, “individuals and their employers may have to pay unpaid tax and penalties, or lose entitlement to benefits, if their employment status is wrong.” This makes it critical to understand exactly how to record earnings, handle taxes, and what to declare.

    The Construction Industry Scheme (CIS) Explained

    The CIS is explicitly designed for the construction industry to regulate payments between contractors and subcontractors. Under this scheme:

    • Contractors must deduct money from subcontractor payments
    • These deductions count as advance payments towards tax and National Insurance
    • Deduction rates vary (0%, 20%, or 30%) depending on the subcontractor’s registration status
    • Monthly returns must be filed by contractors even if no subcontractors were paid
    • Subcontractors need to track deductions to ensure they’re accurately reflected in their tax returns

    Failing to comply with CIS requirements can result in penalties starting at £100 and increasing significantly for repeated non-compliance.

    Specialist Accountancy Support for Contractors and Subcontractors

    As a contractor or subcontractor, you need an accountant who understands the overlapping characteristics of self-employment, freelance work, and subcontracting.

    At Key Accountancy Services, we have years of experience supporting tradespeople with:

    • CIS registration and compliance
    • Tracking CIS deductions throughout the tax year
    • Bookkeeping that captures all allowable expenses
    • Filing accurate self-assessment tax returns
    • Managing VAT returns with construction-specific considerations
    • Limited company accounts for contractors

    Our team’s background working in the construction industry gives us practical insight into the challenges you face daily.

     

    Year-Round Support When You Need It

    We understand that contracting work doesn’t follow a 9-5 schedule. That’s why we offer:

    • Free telephone and email support throughout the year
    • Guidance on claiming allowable expenses specific to your trade
    • Regular check-ins to ensure your tax and CIS affairs remain compliant
    • Advice on managing your cash flow with irregular contract payments

    FAQs

    Self-employed subcontractors must be correctly registered for CIS and self-employment. Your first step is to arrange a face-to-face meeting to discuss your current situation. Whether you need help to bring your accounts up to date, in how to reclaim CIS suffered or for future planning, we’ll provide clear, practical advice.

    If you operate as a limited company, we’ll support you with yearly tax returns and company accounts, Companies House administrative obligations, PAYE requirements and CIS registration.

    We’ll agree on a transparent fee structure, starting with any initial work required (such as CIS registration or self-assessment filing), followed by a fixed monthly fee for your tax return and ongoing support.

    Don’t let financial complexities distract you from what you do best. Contact Key Accountancy Services today for specialist contractor accountancy support.

    Book a free consultation and tell us about your current employer circumstances. We’ll then outline a suitable support plan to handle your company accounts, Companies House administrative obligations and PAYE requirements. Full advice will be provided regarding your responsibilities for verifying subcontractor CIS status, correctly deducting CIS tax, and submitting to HMRC for both deductions from subcontractors and deductions suffered on income.

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