Here's the misconception that costs subcontractors and contractors thousands every year: if your contractor is deducting CIS from your payments, you must be self-employed. You have a UTR, you're registered under the Construction Industry Scheme — that settles it.

It doesn't. CIS is a payment deduction mechanism. It tells HMRC how tax gets collected from payments to subcontractors. It says nothing about whether those subcontractors are genuinely self-employed. That's a separate question — and HMRC answers it using their own tests, regardless of what scheme your payments go through.

Getting this wrong is one of the most expensive mistakes in construction. If HMRC investigates and decides you should have been an employee, the contractor faces backdated PAYE and National Insurance liabilities, sometimes stretching back years. And you, as the subcontractor, may lose expenses you've already claimed and face your own tax correction.

Employee vs Self-Employed: The Key Differences

Before looking at how HMRC tests status, it helps to understand what they're looking for:

HMRC's Three Status Tests

HMRC assesses employment status using three core tests developed through decades of case law. No single test is conclusive — HMRC looks at the overall picture. But each test carries significant weight:

Test 1: Control

Test 2: Substitution

Test 3: Mutuality of Obligation (MOO)

What Happens If HMRC Decides You Were an Employee

The consequences of misclassification fall primarily on the contractor — but the subcontractor is not unaffected:

How to Check Your Status — HMRC's CEST Tool

HMRC provides a free online tool called CEST (Check Employment Status for Tax) at gov.uk. You answer a series of questions about your working arrangement and it gives a determination of whether the engagement is employment or self-employment.

CEST is not legally binding — but HMRC has stated it will stand behind the result if the information you provide is accurate and complete. This gives it significant practical weight. Both subcontractors and the contractors who engage them can use it.

Protecting Your Self-Employed Status

If you work under CIS and want to ensure your self-employed status is defensible, here's what matters:

• Work for multiple clients — single-client arrangements are the biggest red flag. Even occasional work for a second contractor significantly strengthens your position
• Use your own tools and equipment — where possible, supply your own tools rather than using the contractor's. Keep records of what you own
• Have a genuine right of substitution — make sure your contract includes a substitution clause and, if possible, exercise it at least once
• Invoice for jobs — not time — being paid for completing a defined job looks more like self-employment than being paid by the hour or week
• Bear financial risk — if a job runs over or you make an error, a self-employed person absorbs the cost. Document cases where you've covered costs yourself
• Keep your contract up to date — make sure the written contract reflects the actual working arrangement, and review it if the arrangement changes
• Maintain separate business records — a business bank account, proper invoicing, and financial records support your self-employed status

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CIS vs IR35 — Are They the Same Thing?

They're related but different. IR35 (the off-payroll working rules) specifically applies where a worker provides services through an intermediary — typically a limited company (personal service company). It asks whether, if the intermediary didn't exist, the worker would be an employee.

CIS is a tax deduction scheme for payments in the construction industry. It doesn't determine employment status.

Where they overlap: a CIS subcontractor working through a limited company may also need to consider IR35. If IR35 applies, PAYE takes precedence — the contractor deducts income tax and NI as if the worker were an employee, and CIS does not apply to the same payment.