Getting paid as a subbie: CIS, applications and payment terms
Sub-contract work pays differently from domestic, and if you treat it the same you will get caught out. Domestic is: do the job, send an invoice, get paid. Sub-contract is: apply for payment by a date, get assessed, get a deduction taken off, wait a month, chase, and possibly find that half of it is being held as retention.
None of that is unusual or dishonest — it's just a different system with its own rules and its own deadlines. Here's the version that matters if you're the one holding the tools. The CIS and payment-law details below change; verify current rates and rules on gov.uk before acting on them.
CIS in one page
The Construction Industry Scheme is HMRC's system for taxing sub-contractors in construction. The short version: your contractor takes a deduction from your labour before paying you, and sends it to HMRC as an advance payment towards your tax and National Insurance.
The parts that matter:
- Deductions are taken from labour, not materials. Your invoice or application should split labour and materials clearly. If it doesn't, the contractor may deduct from the whole lot, and you've handed HMRC money you didn't owe yet.
- The deduction rate depends on your status. There's a standard rate for registered sub-contractors, a higher rate for unregistered ones, and gross payment status for those who qualify, where nothing is deducted and you settle it all through your own tax return. The specific percentages are set by HMRC — check the current ones.
- Register. Being unregistered means a higher deduction. It's a straightforward registration and it's money for nothing not to do it.
- Keep every payment and deduction statement. The contractor should give you one for each payment. These are your evidence that the tax was deducted, and without them you'll struggle to claim it back.
- You still file a Self Assessment. CIS deductions are payments on account, not a final tax bill. Very often sub-contractors have overpaid across the year and are due a refund — but only if the return is filed. See Self Assessment basics.
- Gross payment status is worth applying for if you qualify — usually requiring a turnover threshold, a clean compliance record and business banking. It's a serious cashflow improvement, since you keep the cash until your tax is actually due.
If you're a limited company sub-contractor, CIS deductions suffered are handled through your payroll returns rather than a personal return — different mechanics, same principle. Worth an accountant's ten minutes to set up correctly.
Applications for payment: the bit domestic trades don't know about
On most sub-contract work you don't simply invoice when you feel like it. You submit an application for payment (sometimes "a valuation" or "an application") by a fixed date each month, for the work done up to a cut-off date. Miss the date and you don't get paid that month — you get paid next month.
That's the single most common way subbies lose money: not fraud, just a missed application date.
What to nail down before you start:
| Question | Why it matters |
|---|---|
| What's the application date each month? | Miss it and you wait another cycle |
| What's the valuation cut-off date? | Determines what work counts this month |
| When is payment due after that? | Your actual cashflow gap — often 30–45+ days from application |
| Who assesses it, and how do I challenge it? | Someone will value your work lower than you did |
| Is there retention, how much, when released? | Money you may not see for a year |
| Is there a PO number needed? | No PO, no payment, in a lot of organisations |
| Am I on their approved supplier list? | Otherwise the first invoice sits in limbo |
Ask all seven in one email before you set foot on site, and keep the reply. That email has saved more subbies more money than any legal advice.
Payment notices — know these exist
UK construction contracts operate under a statutory payment framework. In broad terms it works like this:
- The payer issues a payment notice saying what they intend to pay and how it's calculated
- If they intend to pay less than the notified sum, they must issue a valid pay less notice by a set deadline
- If they fail to issue the required notices in time, the amount you applied for can become the notified sum that's due
This is why your application needs to be a proper application — correctly addressed, on time, clearly stating the sum you consider due and the basis for it. A scrappy text message isn't an application; a properly formatted one puts the burden on them to respond correctly.
There's also a statutory right to suspend performance for non-payment after giving the required notice, and a right to adjudication — a fast dispute process specific to construction, much quicker than court.
None of that is something to wield casually, and the detail is genuinely legal territory. But knowing the framework exists changes how you behave: you keep dates, you keep paperwork, and you don't accept "we'll sort it next month" as an answer.
The classic ways subbies get stiffed
Working before terms are agreed. You start on a handshake, the paperwork arrives in week three, and it's got 60-day terms and 5% retention in it. Get the terms first.
"Just crack on, we'll sort the paperwork." This means no application dates, no PO, no agreed rate. It ends one way.
Variations done as favours. The main contractor's site manager asks for extra work verbally. It's never valued because there's nothing in writing. Every variation gets an email: what was asked, by whom, when, what it costs. Send it the same day, even if nobody replies — an unanswered email is still a record.
Not splitting labour and materials. Costs you a CIS deduction on materials.
Day work without signed sheets. If you're on day work, get the sheet signed on the day by someone with authority. An unsigned day work sheet is a wish.
Letting retention drift. Half of unpaid retention is unpaid simply because nobody ever asked for it. Diary the release dates the day you sign, and chase them like invoices. More on that in staged payments and retentions.
Getting too concentrated. If one contractor is 80% of your turnover, they control your business — and if they go under, so might you. It also raises IR35-shaped questions if you're working through a company on terms that look like employment. Worth understanding when you're choosing between sole trader and limited.
Protecting yourself, practically
Credit-check anyone new. Companies House filings are free to look at. Late accounts, a raft of director changes, or a string of dissolved companies at the same address are all worth noticing before you're owed £15,000.
Ask other subbies. The trade grapevine on who pays is more accurate than any credit report. Ask on site.
Keep your exposure capped. Never let one contractor owe you more than you could survive losing. If the debt is climbing and payments are slipping, that's the moment to slow down — not after the next application.
Keep everything. Applications, notices, emails, day sheets, deduction statements, photos of the work with dates. Sub-contract disputes are won by whoever has the paperwork, and it's very rarely the tradesperson.
Invoice and apply on time, every time. Whatever else is going on, hit their dates. You lose the moral high ground the moment you're late too.
Should you take sub-contract work at all?
It's not a lesser kind of work — it's steady, it's volume, and it can fill the gaps between domestic jobs beautifully. But price it knowing what it actually costs you:
- The money arrives weeks later than domestic work
- Some of it arrives months later (retention)
- You carry more admin — applications, notices, sheets
- Your rate should reflect all of that
A day rate that's fine for domestic work can be a loss on sub-contract terms once you account for the wait. If you haven't worked out your real number, start with how to work out your day rate and then add for the delay.
Whether it's a main contractor or a homeowner, the trades who get paid are the ones whose paperwork is quick and consistent. QuoteSnap keeps every quote, customer and job thread in one place, so applications and invoices go out on the day — not the weekend after. Try it free for 14 days.