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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: construction industry scheme (CIS): status

Status is a major risk within the Construction Industry.

The making of payments to a subcontractor under CIS does not automatically mean that the subcontractor is entitled to self-employment status.

CI Caseworkers must

  • consider the employment status of subcontractors where a perceived risk exists

regardless of whether the contractor holds a verification number.

From 06-04-07 a contractor must complete a declaration on each monthly return (CIS300) to confirm that the employment status of each individual on the return has been considered and that none of the contracts under which returned payments have been made are contracts of employment.

A contractor who fails to make a declaration may be liable to a penalty. COG914000.

A contractor who fraudulently or negligently makes an incorrect declaration may be liable to a penalty. COG914000 

Some contractors may produce a letter (CIS333) which was sent to them by HMRC ready for the start of CIS (Reform) and allege that it proves that the workers are self-employed. The purpose of this letter was to prevent contractors from verifying workers who they did not need to (COG910040) - it has no bearing on the status of the workers.

CI Caseworkers must

  • gather all of the facts of the engagement, both verbal and documentary, including contracts
  • look critically at the terms of the engagement in deciding whether the subcontractor is self-employed or an employee and
  • follow the guidance at COG907540 and in the Employment Status Manual (ESM).