Does IR35 apply to CIS subcontractors?

Not if you are a sole trader. As of October 2026, IR35, which GOV.UK calls the off-payroll working rules, only covers people working through their own intermediary, usually a limited company. Sole traders face the usual employed or self-employed test.

The off-payroll working rules make sure someone who would be an employee if they worked directly for the client pays broadly the same Income Tax and National Insurance as an employee. The Construction Industry Scheme (CIS) is a separate way of collecting tax from self-employed subcontractors. This page follows GOV.UK's off-payroll guidance, HMRC's Employment Status Manual, its CIS manual and section 60 of the Finance Act 2004, all checked on 17 October 2026.

Which rules apply to you

The rules work contract by contract, so one company can have some engagements inside them and some outside.

If you are a sole trader

There is no company between you and the contractor, so the off-payroll rules have nothing to bite on. That does not make you self-employed. HMRC's CIS manual says the scheme only applies where the contract is not a contract of employment, that employment status depends on general law, and that it is for the contractor to decide when it engages you. Whether you are already registered for CIS, gross or net, is irrelevant.

HMRC's Employment Status Manual gives a construction example. A general labourer working full-time or nearly full-time for one contractor over the long term, paid by the hour, day, week or month, closely controlled, required to do the work personally and given everything but small tools, is likely to be an employee. A tradesperson paid for a specific task, who supplies significant equipment or materials and puts right defective work at their own cost, points the other way. Our guide to whether a CIS subcontractor is employed or self-employed goes through the signs.

If you work through your own limited company

GOV.UK says the off-payroll rules apply if a worker provides services through their own intermediary and would have been an employee if they had worked for the client directly. Who decides depends on the size of the client:

• Public sector, medium or large private clients. The client decides and must give a status determination statement with its reasons. If you are inside the rules, the deemed employer, usually whoever pays your company, deducts Income Tax and employee National Insurance from the fee and pays employer National Insurance.
• Small private clients. Your own company decides whether the rules apply.

GOV.UK's client guidance says a private company is medium or large if it meets 2 or more of: turnover over £10.2 million, a balance sheet over £5.1 million, more than 50 employees. HMRC's manual adds that the money limits rose to £15 million and £7.5 million for financial years starting on or after 6 April 2025, and that for a usual 12-month year this can first change a client's size for 2027-28.

Where a public sector, medium or large client decides the rules apply, CIS steps aside. HMRC's CIS manual says the scheme should not be operated on that payment, because the off-payroll rules take priority under section 60(3A) of the Finance Act 2004. Where that client decides they do not apply, or where the client is small (even if your company decides IR35 applies), HMRC's Employment Status Manual says the paying business must still consider whether CIS applies to payments to your company. CIS taken from a company is set against its payroll bill, as our guide to whether a limited company can claim back CIS explains.

What this means for you

As a sole trader, IR35 is not your question. Employment status is. If you work for one contractor, on fixed hours, under a foreman, with their tools, you may really be an employee. GOV.UK says individuals and their employers may have to pay unpaid tax and penalties, or lose benefits, if status is wrong.

If you are thinking of trading through a limited company, the company does not settle status either. If the client is medium or large and you are inside the rules, you are taxed much like an employee on that work, with no CIS deduction. Weigh that up alongside the points in our guide on sole trader or limited company.

Steps to check where you stand

1. Work out how you are engaged: as a sole trader, through your own company, or through an agency or umbrella company.
2. For each engagement, gather the facts: who decides what work is done and how, how you are paid, who supplies tools and materials, and whether you can send someone else.
3. Run HMRC's Check Employment Status for Tax (CEST) tool. GOV.UK says it covers both employed or self-employed status and whether the off-payroll rules apply, and HMRC stands by the result if your answers are accurate.
4. If you work through a company, ask the client whether it is small, medium or large. It must confirm its size if asked.
5. Check each payment statement. A CIS deduction on a payment the client has put inside the off-payroll rules should not happen.
6. Keep your CEST result and any status determination statement with your records.

Making Tax Digital applies to sole traders, not limited companies. The free MTD check shows whether it applies to you, and the trades section has more guides on CIS.