When paying CIS subcontractors, an agency’s responsibilities start before any payment is made. The first step is establishing that the worker is genuinely self-employed and that CIS is appropriate, including considering Supervision, Direction and Control (SDC).
The subcontractor must then be verified with HMRC using the relevant information, including their UTR and National Insurance number. This determines whether they should be paid gross or have the standard 20% or higher 30% deduction applied.
Agencies also need to provide accurate information about approved hours or days, rates and gross payments, while maintaining clear records of verifications, payments and deductions.
CIS deductions must be accounted for and paid to HMRC, the required monthly reporting completed and workers provided with accurate payment records. From 6 April 2026, agencies should also be aware that months with no subcontractor payments may still require a nil return or advance notification.
Paying a subcontractor through the Construction Industry Scheme is not simply a matter of deducting 20% and transferring the balance. For a recruitment agency, there are responsibilities before, during and after that payment.
In our experience at Centurion Payroll, the most important starting point is getting the worker’s status right. From there, the agency needs to make sure the subcontractor is correctly verified, that accurate payment information is supplied, that the correct deduction is made and that there is a clear record of what has been paid and reported.
It is this wider compliance process that makes managing CIS payroll properly so important.
The first responsibility is establishing the worker’s status
Before somebody is paid as a self-employed subcontractor, the agency needs to establish that CIS is actually the appropriate way to pay them.
A worker having a Unique Taxpayer Reference (UTR), or simply telling an agency that they are self-employed and want to be paid through CIS, is not enough on its own.
Recruitment agencies are responsible for determining an individual’s employment status, and an important part of that is considering Supervision, Direction and Control (SDC).
The question is how the individual actually carries out their work.
Supervision is about whether somebody oversees the worker and checks that their work is being completed correctly. Direction concerns whether somebody provides instructions, guidance or advice about how the work must be done. Control concerns whether somebody dictates the work being carried out and how it is completed.
Importantly, a worker does not need to be subject to all three. If they are subject to (or subject to the right of) Supervision, Direction or Control, SDC can apply. Centurion’s guidance is that somebody can only be paid as a self-employed subcontractor where they are genuinely operating without SDC.
So the agency’s first responsibility is not deciding what percentage to deduct. It is making sure the worker is being put through the right payment route in the first place.
Is this subcontractor ready to be paid?
Tick each item as it is completed before processing the payment.
This checklist is a simple guide based on the payroll process described by Centurion Payroll. It does not replace an individual status or compliance assessment.
Every CIS subcontractor needs to be verified
Once the agency is satisfied that the individual can appropriately be treated as a self-employed subcontractor, the next responsibility is making sure they are correctly verified.
At Centurion, we require the information needed to identify and verify the worker, including their full name, National Insurance number, Unique Taxpayer Reference and relevant registration information.
We then verify the worker’s UTR with HMRC using their UTR and National Insurance number.
That verification is important because not every subcontractor should have the same deduction applied.
HMRC’s verification confirms whether the subcontractor should be treated as:
- Gross status – no CIS tax deduction.
- Standard deduction – 20%.
- Higher-rate deduction – 30%.
The 20% rate normally applies to fully registered subcontractors, while the 30% rate applies where a subcontractor is not registered with the scheme.
An agency therefore shouldn’t simply apply 20% because that is what it normally deducts. The worker needs to be verified and the appropriate treatment applied.
Accurate payment information needs to reach payroll
The next responsibility is making sure the information used to calculate the worker’s payment is accurate.
When an agency uses Centurion, the typical process starts with the agency sending us a payment schedule. This usually includes the worker’s name, the number of hours or days they have worked and their hourly or daily rate.
Where different rates apply, that needs to be made clear too.
This might sound like straightforward administration, but it matters. Payroll can only be as accurate as the information it is based on.
If somebody has worked five days but four are submitted, or the wrong rate is supplied, the resulting payment will be wrong even if every CIS calculation afterwards is carried out perfectly.
That is why approved timesheets, payment schedules and worker information need to match before payroll is processed.
The correct deduction needs to be made and paid to HMRC
Once the worker and payment have been verified, the correct CIS deduction needs to be made.
Under CIS, agencies or contractors deduct money from payments to subcontractors and pass those deductions to HMRC as advance payments towards the individual’s tax and National Insurance liabilities.
At Centurion, when we process outsourced CIS payroll, we make the appropriate deduction and send the amount due to HMRC. The subcontractor receives their net payment and is informed of the deductions that have been made.
For agencies handling this themselves, the principle is the same: the correct amount needs to be deducted, accounted for and paid to HMRC.
Dave Davies, Managing Director of Centurion Payroll, explains:
“Paying someone through CIS isn’t simply a case of taking 20% off their payment. The agency needs to make sure the worker is genuinely self-employed, verify them correctly with HMRC and keep an accurate record of what’s been paid and deducted. Getting those steps right from the beginning is what keeps the process compliant.”
Agencies need a clear record of what has happened
Good CIS payroll also needs a paper trail.
That means keeping the worker’s verification information and status, maintaining records of payments and deductions and being able to connect those records back to the relevant worker and payment information.
In practical terms, you should be able to follow the process from:
- Worker
- Approved timesheet
- Payment schedule
- Gross payment
- CIS deduction
- Net payment
- HMRC reporting.
The worker also needs an accurate record of what has been deducted.
When Centurion processes a payment, the worker is notified of their net payment and deductions and receives a secure pay advice so they can retain a record. At the end of the month, workers receive a statement confirming the CIS tax deducted and paid to HMRC on their behalf.
Keeping those records organised is an important part of demonstrating that CIS payroll has been handled correctly.
Monthly CIS reporting still needs to be completed
The responsibilities don’t finish when the worker has been paid.
CIS payroll also involves reporting what has been paid to subcontractors to HMRC. Payroll is followed by a return showing HMRC what has been paid to the subcontractor.
That means agencies need to think about CIS as a monthly compliance process rather than a collection of individual weekly payments.
Each payment and deduction needs to feed into accurate reporting, which is another reason maintaining a clear paper trail throughout the month matters.
A month with no subcontractor payments shouldn’t simply be ignored
There is another responsibility agencies need to be aware of from 6 April 2026.
As covered in Centurion’s guidance on CIS nil returns, a CIS-registered contractor that makes no payments to subcontractors during a tax month may still need to submit a nil return or tell HMRC in advance that no payments will be made.
The important point for agencies is that no payments does not necessarily mean nothing to report.
That needs to become part of the agency’s monthly CIS process, particularly where the use of subcontractors varies from one month to another.
Communication with workers matters too
Compliance is only part of a successful payroll process.
For an agency, its workforce is one of its greatest assets. Workers need confidence that they will receive the right payment at the right time and that, if there is a problem, somebody will deal with it quickly.
That is a significant part of how we approach CIS payroll at Centurion.
When an agency sends us its payment schedule, we contact every worker listed to confirm the hours the agency has approved and tell them when they can expect payment. Once cleared funds are received, we process workers immediately, with payments made using Faster Payments.
That communication helps create transparency between the agency, payroll provider and worker rather than leaving somebody wondering what they have been paid or when their money will arrive.
Outsourcing payroll doesn’t remove the need to supply the right information
An agency can process CIS itself or outsource the payroll to a specialist provider such as Centurion Payroll.
Outsourcing allows much of the administration around deductions, payments and payroll processing to be handled by a specialist. But there are still things we need from the agency.
We need accurate worker and payment information. The agency needs to know who has worked, what has been approved and what each person is due.
Our role is then to provide a personal, flexible and compliant payroll service around that information. We run multiple payrolls every day of the week rather than imposing one deadline on every agency, because different recruitment businesses operate in different ways.
The objective is straightforward: accurate payroll, on time, every time.
CIS responsibility starts before the payment and continues afterwards
Ultimately, an agency’s responsibilities when paying CIS subcontractors extend well beyond making a deduction.
The agency needs to establish that the worker is genuinely self-employed and consider SDC. The subcontractor then needs to be correctly verified so the appropriate CIS treatment can be applied.
Accurate hours, days and rates need to be supplied. Payments and deductions need to be recorded. The amounts due to HMRC need to be accounted for, the required CIS reporting needs to be completed and workers need accurate records of what they have been paid.
And from April 2026, agencies also need to make sure that months without subcontractor payments aren’t automatically treated as months where nothing needs to be done.
At Centurion, our role is to take as much of that payroll administration as possible off the agency’s desk while providing a reliable, flexible and personal service. As an independent, family-run CIS payroll company, our clients have a regular point of contact rather than an impersonal call centre, with a focus on keeping payroll compliant and workers paid correctly and on time.
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