Under the so-called Construction Industry Subcontractor scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs. This may mean that as a contractor you make a deduction, which then you might have to pay to HMRC. When you register for CIS as a subcontractor you will be asked to give HMRC your legal business / company name and your unique taxpayer reference (UTR). You will also be able to give them one trading name for their records. You can ask your contractor to pay you under your registered business name or the trading name you gave to HMRC. This registry as a subcontractor will automatically set you up to receive payments 'under deduction'. Meaning contractors must make a deduction at 20% from most of the value of your invoices and pay it over to HMRC. The deduction is held on account of your eventual tax and National Insurance Contributions liability. But contractors can not deduct from amounts you charge for: VAT Construction Industry Training Board levy materials consumable stores plant hire manufacturing or pre fabricating materials If you don't want to have any deductions from your payments you'll need to prove you're eligible. If you can show HMRC your business passes some qualifying tests, they will grant you gross payment status. Also, if you give a name to your contractor that differs from the one that you used when you registered with HMRC, they may inform your contractor to make a deduction from your payment at the higher rate (30 per cent). For construction subcontractors, the contractor taxes the payment at source at 30%. Users under £30k that are paid this way are likely to get a refund. For the purposes of this system, work includes UK companies involved in: site preparation, alterations, dismantling, construction, repairs, decorating and demolition. The UK includes United Kingdom territorial waters up to the 12­ mile limit or companies based abroad who carry out UK based projects. Before a contractor can enter into partnership and make a payment to a subcontractor for construction work, they need to verify with HMRC that the sub-contractor is registered, unless the subcontractor can verify that they are in fact registered. HMRC can tell a contractor the rate of deduction they must apply to the payment(s) they will make, or whether the payment can be made without any deductions.     Other Keywords: 20%; labourer; builder; constructor; contracting;