Under CIS contractors deduct money from a subcontractor’s pay and pass it to HMRC. A contractor must complete a monthly CIS certificates (even when it is a nil return). Failure to submit the certificate by the monthly deadline can result in a £100 fine.

Contractor – A contractor is a business or other concern that pays subcontractors for construction work.
Contractors may be construction companies and building firms, but may also be government departments, local authorities and many other businesses that are normally known in the industry as ‘clients’.
Some businesses or other concerns are counted as contractors if their average annual expenditure on construction operations over a period of 3 years is £1 million or more.
Private householders aren’t counted as contractors so aren’t covered by the scheme.
When you’re about to take on and pay your first subcontractor, regardless of whether that subcontractor is likely to be paid gross or under deduction.

Subcontractor – A subcontractor is a business that carries out construction work for a contractor.
Subcontractors can apply to be paid gross – with no tax deductions taken from their payments. To do this, subcontractors will need to show us that they meet certain qualifying conditions.

A subcontractor must complete a tax return including the CIS which has been deducted from them that tax year to reclaim it.