Subcontractors need to pay attention to these TM tax changes

For TM firms hired as subcontractors on construction sites, a significant change is coming in March 2025 – the Construction Industry Scheme (CIS) tax will now include their businesses for the first time.

As Re-flow is a TMCA partner, and because we enjoy close relationships with the TM clients using our operations software, we want to make sure our colleagues are up to date. In this way, they can avoid missing registration and paying more tax than necessary.

So here’s a complete rundown of the CIS tax changes: when they begin, the background behind them, and the first steps to take for your company to stay compliant.

The implications of CIS tax for traffic management

Beginning March 2025, a number of traffic management services will fall within the CIS tax rules, meaning traffic management firms will have to register in the scheme to benefit from a reduced tax rate.

Under CIS, the payments they receive from their contractors will include automatic tax deductions, which shifts responsibility away from TM firms themselves interacting with HMRC and onto the contractor.

Important notes: where CIS tax does and doesn’t apply

Taken from gov​.uk, any of the following situations make CIS tax applicable to TM organisations:

• The provision only covers activities that form part of a larger construction operation not already covered by the CIS tax scheme (access a full list).
• The tax covers any preparatory TM operations that either enable construction work to proceed or are integral to completing construction work.
• Traffic management will only fall under the scheme when the contractor is specifically carrying out construction operations.
• The scheme applies when TM is required to allow road works and other construction operations to be completed safely.
• The logic here is that it is similar to scaffolding, which isn’t a direct construction operation but also falls within the remit of CIS when it’s an essential part of construction operations.
• The hire of plant and vehicles with an operator to construction operations are subject to CIS.
• Preparatory work allowing road works and construction operations to commence, such as tree and vegetation removal, adding temporary white lining, or temporary road repairs also fall within CIS.
• Temporary repairs before more permanent repairs are also under the scheme.

Where CIS doesn’t apply for traffic management

• The supply and delivery of traffic management equipment used in relation to construction operations falls outside CIS tax rules. Dropping off materials is exempt, as long as the materials are not placed into position.
• The provision of materials, such as barriers for events and carnivals, are exempt from CIS tax rules as, clearly, no construction operations would be involved.

CIS tax background

CIS has been around since April 1997 and was introduced to tackle tax evasion in the construction industry.

The scheme targeted the large number of self-employed subcontractors not declaring all their income for tax purposes.

Registering for CIS tax

When do you need to register?

You need to register when you are about to start work within the construction industry.

How to register

If you already have a Unique Taxpayer Reference (UTR) number, then you can register for CIS online. If you don’t have a UTR, then you can register for one and for CIS at the same time by choosing the ​‘working as a subcontractor’ option while registering.

Why should you register for CIS?

Tax deduction rates vary depending on whether subcontractors are registered or unregistered, with a 10% tax break for registered subcontractors.

CIS deduction rates:

• 20% for registered subcontractors
• 30% for unregistered subcontractors
• 0% if the subcontractor has ​‘gross payment’ status 

Penalties are applicable to contractors if they file payments late.

For full details of the scheme and how it affects you, the government website contains a more detailed rundown of your requirements.

Re-flow and the industry

As a provider of field management software, Re-flow is set up to make life easier for TM companies in multiple ways.

• Firms get software that connects site to office and gives full visibility of your jobs, enabling robust management and the checking of progress and standards from the office.
• Easy-to-use software with an app usable on operatives’ phones means that everyone on site buys into more efficient processes: from compliance processes to uploading proof of completed work in the form of photos.
• A complete management package sets up jobs, scheduling, manages assets, enforces compliance, and evidences data.
• Existing features and regular updates keep TM businesses compliant with shifting regulations and client expectations – from fatigue tracking to HSE forms.
• TM firms are able to capture the metrics that matter to them – from carbon tracking for PAS2080, various management features for ISOs, and countless other HSE procedures.

Learn more about Re-flow’s field management software and how it can save you money and make your business more efficient, safer, and compliant.