Sub-Contractor Management for UK Trade Businesses
Most trade businesses manage their sub-contractors on WhatsApp and trust. That works until a job goes wrong, HMRC asks questions, or a sub-contractor disputes what was agreed. This guide covers what proper sub-contractor management looks like, and the basics of CIS and IR35 that every trade business owner should know.
Note: this guide is an overview, not legal or tax advice. Consult a qualified accountant or solicitor for advice specific to your circumstances.
What this guide covers
The risks of informal management
Why WhatsApp job briefs and verbal agreements create serious exposure.
What good looks like
Formal job briefs, completion records, photo evidence, and role-gated system access.
CIS basics
Deduction rates, registration, and what happens if you get it wrong.
Employee vs sub-contractor
How HMRC draws the line and why it matters for your business.
Verification before engaging
What to check before putting a new sub-contractor on a job.
IR35 plain English
What IR35 is and when it is (and isn’t) relevant for trade sub-contractors.
What are the risks of informal sub-contractor management?
Most small trade businesses reach a point where they need more labour than their employed team can provide. Taking on sub-contractors is the obvious solution — flexible, available when you need them, and off the payroll when you don’t. The problem is not the decision to use sub-contractors; it is the way most small businesses manage them.
The typical pattern is: a job comes in, you message a trusted fitter on WhatsApp, you agree a day rate or a fixed price in the message thread, the job gets done, and you pay by bank transfer. There is no written brief, no formal record of what was agreed, no completion sign-off, and no proof of what was delivered. This works most of the time. When it doesn’t — when a job goes wrong, when a customer disputes the work, when HMRC asks about your labour costs — the absence of records becomes very expensive.
The CIS compliance risk is the most immediate. If you are paying sub-contractors for construction work (which includes bathroom installation, tiling, and most trade installation jobs), you are legally required to operate CIS. That means verifying each sub-contractor with HMRC before payment, deducting the correct percentage, and filing monthly returns. Operating CIS informally — or not at all — can lead to HMRC enquiries and penalties for small trade businesses.
What does proper sub-contractor management look like?
Proper sub-contractor management does not require a large administrative overhead. The key elements are: a formal job brief before work starts, a system record that holds the brief and is accessible to the sub-contractor, a completion sign-off, and photo evidence of the finished work.
A formal job brief covers the scope of work (what the sub-contractor is responsible for, in enough detail that there is no ambiguity about what “done” means), the materials they are expected to use or source, the start and completion dates, the payment terms and rate, and any safety or site-specific requirements. This does not need to be a lengthy legal document — for a day-rate fitter on a standard bathroom installation, a single page covers everything.
In a job management system, a sub-contractor can be given a separate access role that lets them see the job details, mark tasks complete, and upload completion photographs — without being able to see customer pricing, profit margins, or other jobs they are not working on. This role-gated access means the sub-contractor has what they need to do the job correctly, without exposing commercially sensitive information.
Tying payment to the completion record rather than to a WhatsApp message or a handshake creates a natural incentive for the sub-contractor to complete the sign-off process. It also gives you a defensible record if there is a dispute about whether work was completed to specification, and it provides the evidence your public liability insurer would want to see if a claim arises.
What do trade businesses need to know about CIS and IR35?
The Construction Industry Scheme (CIS) requires contractors to deduct tax at source from payments to sub-contractors. The standard rate is 20% for registered sub-contractors; 30% for those not registered with HMRC. You verify registration status through HMRC’s online CIS service before making any payment, and you file monthly returns showing what you have deducted and paid. The sub-contractor claims back any over-deduction when they file their own tax return.
The most important thing to understand about CIS is what triggers it. It is not about job size or frequency — it applies to any payment for labour on construction work, including bathroom installation, tiling, decorating, heating and plumbing. If you pay anyone to do any of these things, you are a contractor for CIS purposes and must operate the scheme.
IR35 is separate legislation targeting the use of personal service companies to avoid employment taxes. For most sole trader sub-contractors in the trade industry, IR35 is not the primary issue — the relevant question is whether HMRC would classify the arrangement as employment rather than self-employment. The factors that HMRC considers are described above. If you are unsure about the status of any engagement, your accountant can advise on the specific facts.
7-point sub-contractor management checklist
- ✓Register as a CIS contractor with HMRC if you pay sub-contractors for construction work.
- ✓Verify every sub-contractor’s CIS registration status before their first payment.
- ✓Record a formal job brief for every engagement — scope, dates, rate, and payment terms.
- ✓Verify that every sub-contractor holds current public liability insurance before they start work.
- ✓Use role-gated system access so sub-contractors see the jobs they’re working on — nothing more.
- ✓Require photo evidence and a completion sign-off before releasing final payment.
- ✓File your monthly CIS returns on time — late filing penalties start at £100 per return.
Related IBIOS pages and free tools
IBIOS Workforce scheduling is live, with per-person access rights for staff and sub-contractors. Timesheets and mileage are coming soon.
IBIOS (Integrated Business Intelligence & Operations System) is made by IBIOS Limited (NI743167), Northern Ireland. Access is by waiting list; there is no free trial.
- Workforce: scheduling for staff and fitters; timesheets and mileage are coming soon.
- Sub-contractor availability check: a scheduling scenario step by step.
- IBIOS for general builders: the sector page for UK builders working with sub-contractors.
- IBIOS for kitchen fitters: the sector page for UK kitchen fitting businesses.
- Job sheet: a free job sheet for trade jobs.
- HMRC mileage calculator: a free tool to work out mileage at HMRC approved rates.
Frequently asked questions
What are the CIS deduction rates in the UK?
Under the Construction Industry Scheme (CIS), the standard deduction rate is 20% for registered sub-contractors. Unregistered sub-contractors are deducted at 30%. Sub-contractors with gross payment status — typically larger, established businesses — are deducted at 0%. You verify a sub-contractor’s registration status using HMRC’s CIS online service before making any payment. The deducted amounts are paid to HMRC monthly and offset against the sub-contractor’s tax liability.
When do I need to register as a CIS contractor?
You must register as a CIS contractor if you pay sub-contractors for construction work. Construction work includes not just building, but also alterations, repairs, decorating, heating and ventilation installation, and some specialist trades. Bathroom installation, tiling, and plumbing are all within scope. You register via HMRC’s CIS online service, which also gives you access to the sub-contractor verification tool. Failure to register and operate CIS correctly can result in penalties.
What is the difference between an employee and a sub-contractor?
The distinction is determined by the nature of the engagement, not what you call it. Key indicators of employment include: working set hours defined by you, using your tools and equipment, being unable to send a substitute in their place, being under your direction and supervision, and having continuity of engagement. Sub-contractor indicators include: working to a result rather than fixed hours, using their own tools, being able to subcontract the work to someone else, and working for multiple clients. If HMRC determines that someone you treat as a sub-contractor is actually an employee, you become liable for unpaid PAYE, National Insurance, and potentially penalties.
What HMRC penalties apply for CIS non-compliance?
Penalties for CIS non-compliance start at £100 per monthly return filed late, rising to £200 if it is more than 2 months late, £300 or 5% of the CIS deductions due (whichever is higher) if it is more than 6 months late, and further penalties if it is more than 12 months late (check HMRC’s current guidance for the exact amounts). If you fail to deduct CIS from sub-contractor payments, HMRC can hold you liable for the full amount of the deduction that should have been made, plus interest and penalties. HMRC can also open an enquiry into your labour costs if CIS records are incomplete.
Who is liable if a sub-contractor causes damage or injury on site?
Liability for sub-contractor work depends on the circumstances and the contractual arrangements. If you are the principal contractor and the sub-contractor is working under your direction and control, you may share liability for incidents that occur. Public liability insurance covers many scenarios, but the insurer will want to see that you had a formal engagement in place and that you verified the sub-contractor had their own public liability insurance. Using a sub-contractor without a formal written agreement and without verifying their insurance is a significant liability exposure.
How do I get proof that a sub-contractor has completed work correctly?
The most reliable proof is a completion sign-off in your job management system, supported by photographs taken at completion. The photographs should show the finished work in a condition that demonstrates it meets the specification in the job brief. If the job has a defects liability period (a period after completion during which the sub-contractor is responsible for rectifying defects at their own cost), this should be defined in the engagement agreement, and the completion sign-off should include an acknowledgement of it.
What should I verify before engaging a new sub-contractor?
Before engaging a new sub-contractor, verify: their CIS registration status via HMRC’s online tool; their public liability insurance cover (ask for a certificate, not just confirmation); any relevant trade qualifications or accreditations for the type of work (Gas Safe registration for gas work, for example, is a legal requirement); their UTR (Unique Taxpayer Reference) for CIS purposes; and whether they have their own business insurance. For higher-risk trades, ask for references from previous principal contractors.
Is WhatsApp acceptable for job briefs with sub-contractors?
WhatsApp is widely used in the trade industry for communication, but it is not acceptable as the formal record of what was agreed for a job. The problems with WhatsApp-only job briefs are: messages can be deleted by either party; there is no structured record of the specification, materials to be used, or completion criteria; it creates no audit trail for HMRC; and it makes disputes about what was agreed very difficult to resolve. Use WhatsApp for communication but record the formal job brief — scope, materials, dates, and payment terms — in a system that cannot be retrospectively altered.
What is IR35 and does it apply to sub-contractors in the trade industry?
IR35 is legislation designed to prevent workers from using a personal service company (PSC) to avoid PAYE and National Insurance. It applies when a worker provides services through their own limited company but would, in substance, be regarded as an employee if engaged directly. For most trade sub-contractors who work through a sole trader structure or a genuine small limited company with multiple clients, IR35 is not the primary concern — the CIS distinction between contractor and employee is more relevant. However, if you engage a sub-contractor who works exclusively for you through a limited company, you should consider whether the engagement might fall within the employed earner rules.
Do I need written contracts with sub-contractors for small jobs?
Yes — a written record of the terms is advisable for every engagement, regardless of value. For small, repeat-pattern jobs with established sub-contractors, a standard terms document agreed once and referenced per job is sufficient. For new engagements or high-value jobs, a job-specific agreement covering scope, payment terms, defects liability, and insurance requirements gives you a clear basis for resolving any dispute. The cost of writing a brief agreement before the job is trivial compared to the cost of a dispute after it.
See sub-contractor access in IBIOS.
Role-gated access for sub-contractors, formal job briefs, completion sign-offs, and photo records — all in one place.