Mistaking a worker as CIS instead of PAYE (or vice versa) means HMRC may see their employment status as misclassified, which can lead to penalties, back taxes, and payroll corrections.

👉 PAYE = Employees
Tax & National Insurance are deducted directly through payroll.

👉 CIS = Self-employed subcontractors
Contractors usually deduct 20%/30% towards tax, while the subcontractor manages their own Self-Assessment.

If the wrong scheme has been used, businesses may need to:
✔ Update the worker’s status
✔ Refund overpaid tax
✔ Submit amended payroll filings

A simple classification mistake can quickly become a costly compliance issue.