Two schemes for two different situations. CIS is about paying subcontractors in construction. IR35 is about working through your own company. Both look at how the work really happens, not at what the paperwork says.
What you have to do: register as a contractor, verify each subcontractor with HMRC before their first payment, deduct at the rate HMRC gives you, and file a monthly return even in months you pay nobody.
Regular is the word to watch. Three subcontractors who work only for you, use your tools and follow your schedule may not be subcontractors at all. That is an employment status question and it is more expensive than CIS.
Want GRACE to run the status test on how they actually work?
It answered CIS and then flagged the larger question hiding behind the word regular.
If you are in construction
If you pay subcontractors for construction work, you are a contractor under the Construction Industry Scheme. Register before you pay your first subcontractor, verify each new one with HMRC before their first payment, and deduct tax from the labour part of every payment at the rate HMRC gives you. A homeowner paying for work on their own home is never a contractor.
CIS rates and deadlines
HMRC's answer sets the deduction: 20% if the subcontractor is registered, 30% if unregistered or unmatched, and 0% with gross payment status. The deduction is on the payment less VAT and less their direct cost of materials. Each tax month runs from the 6th to the 5th: give statements within 14 days of month end, file the monthly return by the 19th and pay by the 22nd electronically. Since 6 April 2026 you must also file a nil return or tell HMRC you are inactive in a month you paid no subcontractors. A late return costs £100 at once and £200 more at 2 months, rising after that. As of Oct 2026.
Finance Act 2004 ss.57 to 77; Income Tax (Construction Industry Scheme) Regulations 2005; Finance Act 2009 Sch 55; HMRC CIS 340
| Labour | £4,000 |
| Materials, which are not deducted from | £1,500 |
| CIS deduction: 20% of the £4,000 labour | -£800 |
| You pay the subcontractor | £4,700 |
| What you pay if HMRC cannot match them | £4,300 |
30% of £4,000 is £1,200, so you pay £4,300. Either way the deduction goes on your return by the 19th and to HMRC by the 22nd.
If you supply your own labour through a company
IR35 asks whether, without the company in the middle, you would look like an employee of your client. Where the client is a medium or large business, the client decides your status and must give you a Status Determination Statement with its reasons. Where the client is small, your own company decides and accounts for any tax.
Small clients and pushing back
A client is small if it meets two of the three Companies Act size limits: turnover, balance sheet and 50 employees. In 2026 to 2027 most clients are still measured on £10.2 million turnover and a £5.1 million balance sheet. If you disagree with a Status Determination Statement, send written reasons while the engagement runs: the client then has 45 days to confirm its decision with reasons or issue a new one. As of Oct 2026.
ITEPA 2003 Part 2 Chapters 8 and 10, ss.61NA and 61T
Both are about substance over labels: control, substitution, and financial risk. A right to send a substitute that would never really be used counts for nothing (Autoclenz Ltd v Belcher [2011] UKSC 41). Ask GRACE about the working relationship and MARCUS about the tax treatment.
I [use subcontractors / work through my own limited company] in [industry]. Explain whether CIS or IR35 applies to me, what I have to do, and what happens if I get it wrong.
Every lesson ends with a question to hand to a Greymill specialist, who answers with what it knows about your business.