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The construction industry scheme (CIS) requires a contractor to declare in each monthly return that it has reviewed the employment status of its workers for each engagement and is satisfied that they are self-employed, see E5.542B¹. The monthly return includes the following declaration:

'The employment status of each individual included on this return and on any continuation sheets has been considered and payments have not been made under contracts of employment.'

Therefore, the person signing the return must ensure that they are absolutely clear as to the employment or self-employment status of all of the subcontractors. A penalty charge will arise if the monthly return is not submitted, or the entries on it are incorrect (including an incorrect employment status declaration), see E5.547L.

The HMRC position is that, if some contractors fail to meet their responsibilities on employment status, this can create unfair competition within the industry between contractors who meet their responsibilities and those who do not. It is therefore vitally important that contractors understand how to determine the employment status of their