Contractor Registration & Deemed Contractor Rules: What Every Business Must Know

Why Contractor Registration Matters

The Construction Industry Scheme (CIS) places strict responsibilities on contractors. Whether you’re running a construction business, managing property developments, or classed as a “deemed contractor” due to large construction spend, HMRC requires registration under CIS.

Failing to register on time creates immediate risks — from higher deduction rates for subcontractors to penalties and cash flow disruption.

This article explains how contractor registration and deemed contractor rules work in 2025/26, why errors are costly, and how Wexley & Associates helps clients avoid HMRC scrutiny.

Who Must Register as a CIS Contractor?

Under CIS, you must register as a contractor if:

• You pay subcontractors to do construction work.

• Your business does not do construction, but you spend over £3 million on construction operations in a rolling 12-month period (known as a deemed contractor).

This means CIS applies far beyond builders — it also captures property developers, local authorities, and businesses with significant construction spend.

👉 Key risk: Many companies underestimate their construction spend and accidentally cross the £3m deemed contractor threshold without realising they must register.

Contractor vs Deemed Contractor: Key Differences

• Contractor: A business whose core activity involves engaging subcontractors for construction.

• Deemed Contractor: A non-construction business (e.g., a retailer, manufacturer, or investment firm) that meets the £3m spend test on construction within 12 months.

Both have the same CIS obligations: verifying subcontractors, deducting tax, submitting monthly returns, and keeping detailed records.

Risks of Non-Registration

Failing to register as a contractor or deemed contractor can cause:

• Automatic 30% deductions from payments to subcontractors (instead of the standard 20%).

• HMRC penalties for failing to operate CIS correctly.

• Cash flow damage for both contractor and subcontractors.

• Heightened HMRC scrutiny of your wider tax affairs.

👉 Non-registration isn’t just a technical oversight — it creates real financial costs and reputational damage.

Deregistration & Status Changes

If your business no longer meets the CIS contractor or deemed contractor criteria, you can deregister. However:

• HMRC requires evidence that you no longer engage subcontractors or meet the £3m spend test.

• You must continue CIS obligations until HMRC confirms deregistration.

Mismanaging deregistration risks penalties and missed compliance.

How Wexley & Associates Supports Contractors

At Wexley & Associates, we help clients:

• Register correctly with HMRC and avoid defaulting into non-compliance.

• Monitor spend levels so businesses don’t miss the deemed contractor threshold.

• Manage ongoing obligations such as subcontractor verification and monthly returns.

• Advise on deregistration when construction activity ends, ensuring smooth compliance.

With expert support, contractors avoid penalties, safeguard cash flow, and maintain confidence that CIS is handled correctly.

Protect Your Business from CIS Risks

Contractor registration under CIS is not optional — and HMRC penalties for errors are immediate. Whether you’re a construction firm or a business caught by the deemed contractor rules, professional support is the safest way to stay compliant.

👉 Contact Wexley & Associates today to ensure your contractor obligations are managed seamlessly and your business is fully protected.

References

• HMRC: CIS 340 – Construction Industry Scheme: Guide for Contractors and Subcontractors

• Related Wex Insider article: The Construction Industry Scheme (CIS): The Complete 2025/26 Guide for Contractors & Subcontractors