Subcontractor or employee? Checking a subbie's status

↑ Part of the Tax & VAT series · CIS for subcontractors

Paying someone through the Construction Industry Scheme does not make them self-employed. CIS is a way of taking tax off payments to subcontractors; whether a person really is a subcontractor depends on how the work is actually done. If someone works only for you, on your hours, under your direction, using your plant and materials, HMRC can decide they were an employee all along, and the contractor is the one who owes the tax and National Insurance that should have gone through payroll.

This page sits under our CIS guide for subcontractors, and it matters most if you have started taking on subbies yourself. Our guide to CIS for contractors covers registering and verifying them; this one covers whether they should be on CIS at all.

Part 1Why it matters

---

If a worker you pay as a subcontractor is really an employee, the consequences land on you as the engager:

• Tax and National Insurance. HMRC can look for the PAYE income tax and the employee's and employer's National Insurance that should have been paid, less what was deducted under CIS, with interest and possibly penalties.
• Employment rights. An employee, or a worker, has rights a subcontractor does not, such as holiday pay and the minimum wage. A tribunal decides that question for itself, and it can reach a different answer from HMRC.

Neither depends on what your paperwork calls the person. Both depend on the working relationship as it actually is.

Part 2The signs that count

---

GOV.UK's guidance on employment rights says someone who is already self-employed for tax purposes is probably self-employed for employment rights too if most of these are true:

• They put in bids or give quotes to get work.
• They are not under direct supervision when working.
• They submit invoices for the work they have done.
• They are responsible for paying their own tax and National Insurance.
• They do not get holiday or sick pay.
• They work under a contract for services, as a self-employed contractor.

Several of those are paperwork you control, such as invoices and a contract that says "self-employed", so they cannot settle the tax question on their own. For tax, HMRC looks at how the work is actually done, and in construction a few practical questions do most of the work:

• Who decides how the job is done? Telling a subbie what you need and by when is normal. Standing over them deciding how, hour by hour, looks like employment.
• Can they send someone else? A subcontractor who could send a competent replacement is running a business. One who has to turn up personally looks more like an employee.
• Who carries the risk? A subbie priced per job who has to put mistakes right in their own time is in business. One paid by the hour whatever happens is less clearly so.
• Whose kit? Plant or major equipment they supply for the job, and their own van and insurance, point towards a business. Hand and power tools count for little either way, because employed trades bring their own too.
• Do they work for others? Several customers over a year is a strong sign of a business. Years spent working only for you, every week, is the pattern HMRC questions most.

No single answer decides it. The overall picture does.

Part 3Labour-only subcontractors

---

A labour-only subcontractor supplies the work and nothing else. You buy the materials, and usually the plant, and they turn up and fit it. It is an ordinary way to run a site, and it is also the arrangement HMRC looks at hardest, because two of the signs that point to a business, their own materials and their own equipment, are gone. What is left has to carry the weight: priced work rather than hours, freedom to send someone else, putting their own mistakes right, and other customers.

There is a CIS point as well. The deduction comes off the whole payment except the VAT and the materials, plant and consumables the subcontractor paid for themselves. A labour-only subbie usually has none of those on the invoice, so the deduction is taken from the whole net amount, at 20% if they are registered, 30% if they are not, and nothing if they hold gross payment status.

Part 4Use HMRC's CEST tool

---

HMRC's Check employment status for tax (CEST) tool asks about the working arrangement and gives a result for tax purposes. HMRC says it will stand by the result as long as the information you gave is accurate and the arrangement matches it. Run it for anyone working for you regularly, save the result with the date, and run it again if the arrangement changes.

It is only as good as the answers. A result based on how you would like the arrangement to work, rather than how it does, protects nobody.

Part 5Habits that keep a subbie a subbie

---

If the relationship really is a business-to-business one, make the paperwork match it:

• A written quote or subcontract for each job or package, priced for the work rather than by the hour where you can.
• Invoices from them, showing labour and materials separately for CIS.
• Their own insurance, equipment and transport, and their own way of doing the work to your specification.
• Freedom to work for others, and to send a suitable replacement.
• A fresh look at long-running arrangements. A subbie who has worked for nobody else for two years is worth running through CEST again.

If the honest answer is that someone works like an employee, the cheaper fix is usually to put them on payroll now rather than to argue later. That is a conversation for your accountant.

Common questionsSubcontractor or employee: quick FAQ

---

Does registering for CIS make someone self-employed?

No. CIS is how tax is deducted from payments to subcontractors. Whether someone is self-employed depends on how they actually work, and HMRC looks at the arrangement, not the registration.

What happens if HMRC decides my subbie was an employee?

HMRC can look to you for the income tax and National Insurance that should have been paid through payroll, less what was deducted under CIS, with interest and possibly penalties. Employment rights are decided separately.

What is a labour-only subcontractor?

Someone who supplies their labour while the contractor provides the materials and usually the plant. It is common and it is legitimate, but with no materials or equipment of their own, control, substitution and financial risk decide whether they are really self-employed. Under CIS the deduction is normally taken from their whole invoice, less VAT.

What is the CEST tool?

HMRC's online Check employment status for tax tool. You answer questions about the working arrangement and it gives a result for tax purposes, which HMRC says it will stand by if the information you gave is accurate.

Can a subcontractor work only for me?

They can, but it is one of the signs HMRC looks at. Combined with you controlling how and when they work, providing the tools and paying by the hour, it points towards employment.

Is paying by the day a problem?

Not on its own. Day rates are common for genuine subcontractors. It is one factor among several; control, substitution, risk and working for others count too.

This guide is general information for UK tradespeople, current to the best of our knowledge in 2026, and is not tax, accounting or legal advice. Rates, thresholds and how they apply to you change, so confirm your position with HMRC, a qualified accountant or a solicitor before relying on it. TradeDraft accepts no liability for decisions made on the basis of this guide. Questions: hello@tradedraft.co.uk.