The law requires all construction industry contractors to register with the scheme. Contractors must verify the legitimacy of any sub-contractors that they aim to pay for construction services with HMRC before they pay them, and to report all payments made to sub-contractors to the revenue on a monthly basis. It also requires the contractor to make deductions of up to 30% from the sub-contractor, and to pay this deduction to HMRC on behalf of the sub-contractor – a payment “on account” of his annual self-employed tax bill.  Contractors are also required to keep detailed records, and provide sub-contractors with a deduction statement. If sub-contractors do not register with the scheme, they will automatically suffer deductions at the higher 30% rate.