Subcontractor vs employee: getting it right for CIS

Whether someone working for you is genuinely a subcontractor or should be treated as an employee is one of the most consequential classification decisions in construction, with real financial risk if it's wrong.

Why it matters

Employees require PAYE, employer's National Insurance, and employment rights; subcontractors are handled under CIS instead. Misclassifying an employee as a subcontractor can lead to significant backdated liabilities if HMRC disagrees.

What HMRC actually looks at

Factors include how much control you have over how, when and where the work is done, whether the individual can send a substitute, and who bears financial risk for the work — not simply what you call the arrangement.

Getting it wrong is expensive

If HMRC reclassifies a subcontractor as an employee, the business can face backdated PAYE, National Insurance, and penalties, often years after the work was done.

Our advice

We review working arrangements against HMRC's actual tests, not just contract wording, and flag any relationships that carry real reclassification risk before it becomes a problem.