Contractor or Subcontractor?

Businesses and other organizations covered by the Construction Industry Scheme (CIS) have to register with HM Revenue and Customs as either a contractor or a subcontractor or both.

A business, organization, government department or local authority is:

• A “mainstream” contractor if it employs and pays subcontractors for construction work. Mainstream contractors are mainly:
  – Building businesses, including foreign ones that carry out construction work themselves or hire other businesses to do it too.
  – Property developers and speculative builders who build or renovate properties to make a profit.
  – Gangmasters (gangleaders) who organise and manage labour for construction works.
• A “deemed” contractor if it spends on construction operations an average of £1 million or more a year in the last three years. Deemed contractors are mainly:
  – Non-building businesses like manufacturers or retailers.
  – Local authorities, government departments and other public bodies as for instance NHS.
  – Housing associations, housing corporations and trusts.

Private homeowners are not counted for as contractors regardless of how much they spend on construction work on their own properties.

A business, organization, government department or a local authority is a subcontractor if it agrees to carry out any construction work for a contractor. It does not matter how subcontractors actually do the work – by themselves, using their own employees or other subcontractors. The latter means that you are a subcontractor and contractor at the same time.

It is not unusual to work as a contractor and subcontractor at the same time. It happens if you pay other businesses for construction work and are yourself paid by other contractors too. In that case you must follow the CIS rules for contractors when working as a contractor and the CIS rules for subcontractors when working as a subcontractor.

It is sometimes difficult for labour agencies and gang leaders to make out whether they work as contractors or subcontractors.

1. Labour agencies are subcontractors if their employees work for contractors. They are not subcontractors if they just introduce workers to a contractor who may or may not employ them in his business.
2. Gang leaders (gangmasters) are subcontractors if they are directly paid by contractors. But if a contractor has separate agreements with gang members and pay them directly, they are subcontractors, not their gang leader.

If you want Capital Business Links Ltd to help you in establishing your status under the CIS, do not hesitate to contact us on telephone number 0208 567 99 44 or at our e-mail address.