10 Mar Changes to CIS as Traffic Management Services to Be Brought Within Scope from March 2025
From March 2025, traffic management services will be brought within the scope of the Construction Industry Scheme (CIS). This is a significant regulatory change that will impact businesses providing or using these services in construction operations. With the tax treatment of these services now clearly defined, contractors and traffic management providers must ensure they are compliant to avoid unnecessary tax deductions or penalties.
What’s Changing?
The CIS, originally introduced to regulate payments within the construction sector, requires contractors to deduct tax from subcontractor payments before passing it to HMRC. Until now, traffic management services have generally been outside this scheme. However, from March 2025, certain activities will now be classified as integral to construction operations and must adhere to CIS rules.
The UK government confirmed this change in its latest Agent Update 125, published by HMRC. The update clarifies that from 1 March 2025, traffic management services will only be within CIS when supplied to a contractor carrying out construction operations. The classification of these services as “preparatory or integral” to roadworks is a shift from previous guidance and supersedes any earlier rulings or exemptions.
Traffic management services now subject to CIS include:
- Temporary traffic control – Installing and managing temporary traffic lights where work affects road conditions.
- Construction-related diversions – Setting up pedestrian crossings or diversions required to enable construction work.
- Traffic flow management for roadworks – Placing and adjusting cones, barriers, and signage directly linked to construction projects.
- Ongoing traffic safety – Supervising and maintaining traffic control measures throughout construction work.
However, some traffic-related activities remain outside CIS. Services such as providing barriers for public events, music festivals, or council-led non-construction-related activities will continue to be exempt. Additionally, businesses that merely supply traffic management equipment without installing or managing it on-site will not be affected.
How Will This Affect Businesses?
For Traffic Management Providers
Businesses offering traffic management services must assess whether their work falls within the new CIS framework. If so, payments they receive from contractors may be subject to CIS deductions at rates of 20% (for registered subcontractors) or 30% (for unregistered ones). This change could create significant cash flow challenges, particularly for smaller companies.
To mitigate these deductions, businesses may apply for gross payment status, allowing them to receive full payment before tax. However, eligibility requires a strong compliance record and adherence to HMRC’s financial criteria.
For Contractors and Recruitment Agencies
Contractors and agencies hiring traffic management providers must now apply CIS deductions where applicable. This means:
- Deducting the correct tax rate before processing payments.
- Ensuring CIS compliance when hiring subcontractors providing traffic management for construction projects.
- Updating contracts to reflect the correct tax treatment.
- Fulfilling reporting obligations to HMRC to avoid penalties.
Failing to apply CIS correctly could result in financial penalties or increased scrutiny from HMRC. It is essential for businesses to review their agreements and payment processes before the new rules take effect.
Steps to Ensure Compliance
With March 2025 approaching, businesses should take the following proactive measures:
For Traffic Management Providers
Businesses providing traffic management services must carefully assess whether their operations now fall within the scope of CIS. This includes reviewing the types of services offered and identifying contracts that involve supporting construction activities. If services qualify, registration as a CIS subcontractor is essential to ensure compliance and avoid unexpected tax deductions.
For those eligible, applying for gross payment status can help retain full payments without upfront deductions, improving cash flow stability. Given that CIS deductions can impact financial planning, businesses should evaluate how these changes might affect their revenue streams and adjust forecasting accordingly.
For Contractors and Recruitment Agencies
To remain compliant, contractors and recruitment agencies must ensure that their internal teams fully understand the CIS changes and how they apply to traffic management services. This includes training staff on tax deduction rates, reporting obligations, and HMRC’s compliance requirements.
A key step is to review existing contracts with traffic management providers, ensuring that all agreements align with CIS tax treatment rules. Adjusting payment structures may be necessary to reflect the correct withholding rates for registered and unregistered subcontractors. Additionally, internal processes must be updated to handle CIS reporting accurately, preventing penalties for misapplication of deductions.
How i4 Can Support Your Business
Expert Guidance on CIS Compliance
Understanding and adapting to these changes is essential to avoid compliance risks. i4 Services helps businesses navigate the updated CIS rules, ensuring they understand how the changes affect them and what steps to take.
CIS Registration and Tax Obligations
Whether you’re a traffic management provider or a contractor, i4 can assist with CIS registration, determining tax obligations, and ensuring correct deductions are applied. Proper registration can prevent unnecessary tax deductions and ensure compliance with HMRC regulations.
Mitigating Cash Flow Disruptions
CIS deductions can create financial strain. i4 Services offers practical strategies to minimise cash flow disruptions, helping businesses assess eligibility for gross payment status and adjust their financial planning accordingly.
Streamlining Contracts and Supplier Payments
Ensuring contracts align with the new CIS rules is essential. i4 provides support in restructuring agreements, reviewing supplier payment processes, and managing reporting obligations to keep businesses compliant and penalty-free.
Preparing for 2025: Take Action Now
Adapting to regulatory updates ensures uninterrupted business operations. With the new CIS rules imminent, contractors and traffic management providers should act now to avoid potential financial and operational disruptions.
Contact i4 for advice on this matter.