Questions and Answers
Contractor: Limited Company or Sole Trader?
As a Construction Industry Scheme (CIS) contractor, on top of the standard question for self-employed workers of whether to set up as a limited company or a sole trader, are there any CIS specific issues to be aware of?
Last updated 25 Feb 2026 | First published 2 May 2019
By Helen Wood, CA 1 min read
Contractors
From a CIS point of view there is another factor that can affect your decision when thinking about whether to become a limited company or not.
Sole trader
Being a sole trader, any tax withholdings under CIS that you and your business face when your invoices are paid can only be reclaimed via your own self-assessment tax return. This means that you can only claim it once the tax year is up, so you may have to wait up to a year to get the refund you are due. This refund is obtained as the CIS deductions made against your invoices (i.e. tax deducted) is similar to a payment on account of your income tax and national insurance contributions (NICs) bill.
Limited company
If you work as a sub-contractor through a limited company, you are allowed to offset any CIS withholdings made against invoices issued by your business against any CIS witholdings, PAYE tax or NIC deductions that you are due to pay over to HMRC each month. This means that your company gets the relief much sooner and throughout the tax year.
Need some help?
TaxAssist Accountants can look into your specific situation and help ensure you make the right decision for your construction business. To see if incorporating could benefit your business, so please give us a call on 020 3793 2199 and arrange a meeting with us today or contact us online.
*This Q&A only looks at a limited company from a CIS point of view and takes no consideration of other factors that could affect this decision. Please seek professional tax advice before taking any action.
Last updated 25 Feb 2026 | First published 2 May 2019
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Helen Wood, CA
Helen is a qualified chartered accountant (CA) and joined TaxAssist in 2025 following three years as a freelance content writer for clients in the tax and accounting publishing sector. Prior to this, She spent 17 years at Big Four and Top 10 accountancy firms. Helen writes clear and helpful articles on tax and accounting for businesses and individuals.
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