CIS contractors and the IR35 boundary

12 July 2022
2 minutes
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Where the Construction Industry Scheme ends and IR35 begins, and why an engagement can sit under both.

Two schemes, two questions

CIS governs how payments to subcontractors in construction are taxed at source. IR35 governs whether an engagement through an intermediary is really employment.

They answer different questions, so being registered under CIS says nothing about an IR35 position.

When both apply

A contractor working through their own limited company in construction can be within CIS and within scope of IR35 at the same time.
Where an engagement is determined inside IR35, PAYE applies and the CIS deduction does not run alongside it on the same payment.
Where it is outside, CIS deductions continue in the ordinary way.
Materials and VAT are treated separately again, and the reverse charge may apply.

The practical failure mode

The common mistake is treating a CIS deduction as evidence of self-employment. It is a payment mechanism, not a status conclusion, and an enquiry will look straight past it to how the work was done.

Getting the order right

Determine status first, then apply the deduction regime the determination implies. Doing it the other way round produces a defensible-looking payment history for an indefensible position.

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Frequently asked questions

The questions hiring firms and contractors ask most often about this subject.

Craig Moss

leads an exciting management role at Promultis

Craig Moss is a seasoned professional in the employment and recruitment industries, based in Kings Langley, UK. With over 30 years of experience, including a successful tenure as a central London realtor handling properties up to £3 million, he now leads an exciting management role at Promultis. Specialising in compliant payroll solutions for contract recruitment, Craig helps clients increase margins by up to 30% while navigating complex legislation. His people-focused approach, honed through decades in sales and people management, ensures both recruiters and workers benefit from tax-efficient, compliant solutions. Passionate about building strong relationships, Craig thrives on delivering results that drive business success.