Since 6 April 2026, mainstream contractors must also submit a nil return or tell HMRC about a period of inactivity if no subcontractors have been paid. If neither is done, HMRC may issue an initial £100 penalty. This guide explains what to include, the key deadlines and how CIS affects both contractors and subcontractors.
Key Takeaways
What is a CIS Monthly Return, & Who has to File it?
A CIS monthly return tells HMRC which subcontractors a contractor paid during the previous tax month, how much they received and any deductions made. These deductions are normally passed to HMRC as advance payments towards the subcontractor’s tax and National Insurance.
Under CIS, a contractor can be a 'mainstream contractor', a business whose own activities include construction operations or a 'deemed contractor', a business that does not carry out construction itself but spends more than £3 million on construction in a rolling 12-month period.
The contractor files the return, not the subcontractor, who must instead keep their payment and deduction statements for their own tax records.
To understand which activities, fall outside the scheme, read our guide: CIS Exemptions Explained: Which Work, Trades and Businesses Are Excluded.
When is the CIS Return Due Each Month?
A CIS monthly return must reach HMRC by the 19th after the end of the tax month, which runs from the 6th of one month to the 5th of the next. For example, payments made between 6 May and 5 June must be reported by 19 June. Even a one-day delay may result in an initial £100 penalty, with further penalties if the return remains outstanding.
The filing and payment deadlines are separate. You must submit the CIS return by the 19th. Any CIS deductions must also reach HMRC by the 19th if you pay by a non-electronic method, or by the 22nd if you pay electronically.
If your combined PAYE and CIS payments average less than £1,500 a month, you may be able to pay HMRC quarterly. However, this only changes when you make the payment. You must still submit a CIS return every month.
What Goes into the Monthly Return?
For each subcontractor paid, the return should include their HMRC-registered details, the gross payment before VAT, any relevant materials costs and the CIS deduction made.
Before paying a subcontractor for the first time, you must verify them with HMRC, as this determines the correct deduction rate. Separately, each monthly return requires you to declare that none of the subcontractors listed are, in fact, employees. Getting this employment-status declaration wrong regardless of whether verification itself was carried out correctly can result in a penalty of up to £3,000. Returns can be filed through HMRC’s online service or compatible software, but avoid using both for the same period, as information may be overwritten.
The April 2026 Nil-Return Change
Since 6 April 2026, a quiet month no longer means there is nothing to do. If a mainstream contractor pays no subcontractors, it must still file a nil return by the 19th or notify HMRC of a period of inactivity. Failing to do either may lead to an initial £100 late-filing penalty.
For example, if no subcontractor payments are made between 6 June and 5 July, action is still required by 19 July. An inactivity request can cover up to six months and ends automatically when a return showing payments is filed.
Deemed contractors are treated slightly differently. They are not legally required to file a nil return, but HMRC may still issue a penalty if it is not told that no payments were made. The safest approach is to keep HMRC informed whenever there is nothing to report.
How CIS Verification & Deductions Work
Before paying a new subcontractor, check their employment status and verify them with HMRC where required. HMRC will confirm how their payments should be treated. Re-verification is usually not needed if they appeared on your CIS returns in the current or previous two tax years.
CIS deductions are calculated after removing VAT and qualifying costs such as directly purchased materials and eligible plant hire. Whenever a deduction is made, give the subcontractor a payment and deduction statement by the 19th. They should keep it as evidence for their tax records.
Worked Example: Calculating a CIS Deduction
A subcontractor invoices £3,000 for a supply-and-fix job, excluding VAT. They also provide evidence of £600 in qualifying materials purchased directly for the work.
Calculation | Standard deduction(20%) | Higher-rate deduction(30%) |
|---|---|---|
Gross payment, excluding VAT | £3,000 | £3,000 |
Less qualifying materials | (£600) | (£600) |
Amount subject to deduction | £2,400 | £2,400 |
CIS deduction | £480 | £720 |
Net payment, excluding VAT | £2,520 | £2,280 |
Whenever a CIS deduction is made, the contractor must provide a payment and deduction statement within 14 days after the tax month ends, normally by the 19th. The subcontractor should keep this as evidence of the deduction.
What Are the Penalties for Filing a CIS Monthly Return Late?
CIS penalties increase the longer a return remains outstanding:
How late | Penalty |
|---|---|
1 day | £100 |
2 months | A further £200 |
6 months | A further £300 or 5% of the CIS deductions, whichever is higher |
12 months | Normally a further £300 or 5% of the deductions, whichever is higher |
These penalties are cumulative, so one missed return can quickly become costly. If HMRC believes information was deliberately withheld, the 12-month penalty rises to 70% of the CIS deductions (subject to a minimum of £1,500) for deliberate but not concealed behaviour, or 100% (subject to a minimum of £3,000) where the withholding was deliberate and concealed.
HMRC may also charge penalties for careless or deliberate errors, missing records, or failing to provide accurate payment and deduction statements. Record-related penalties can reach £3,000.
You can appeal online or in writing within 30 days of the date on the penalty notice, but not by phone. Set out the reason clearly and provide evidence of any reasonable excuse as soon as possible.
CIS Contractor Monthly Checklist
What Does the Monthly CIS Return Mean for Subcontractors?
The contractor files the monthly CIS return, but the figures reported affect your tax position. CIS deductions are advance payments towards your tax and National Insurance, so they must be recorded and claimed through the correct process for your business.
Your main record is the payment and deduction statement. If CIS has been deducted, the contractor must provide one within 14 days after the tax month ends. Check that the payment, qualifying materials and deduction match your invoices, receipts and bank records. If anything is wrong, ask the contractor to correct it promptly, as mismatches may delay HMRC crediting the deductions.
To learn about CIS Payment and deduction statement read this article: What is a CIS Payment & Deduction Statement?
How You Claim CIS Deductions Depends on Your Business Structure
Sole traders and partnerships
Sole traders and partnerships claim CIS deductions through Self-Assessment. They must report their full income and enter the deductions separately. HMRC then credits the deductions against the final tax and National Insurance due and may repay any genuine overpayment.
Limited companies
Limited companies claim CIS deductions through payroll using an Employer Payment Summary, not through the Corporation Tax return. Unused amounts are carried forward during the tax year, while any year-end balance may be repaid or set against Corporation Tax through HMRC’s separate process.
HMRC may ask for payment and deduction statements as evidence. If a company does not respond in time, HMRC can amend the claim and block further CIS set-offs for that tax year, subject to appeal.
CIS Subcontractor Checklist
How Does CIS Apply to Property Developers & Investors?
Property developers are generally treated as mainstream CIS contractors because their work involves building, renovating or converting property. A property investor may also fall into this category where substantial development changes the nature of its activities.
A property investment business can also become a deemed contractor if its construction spending exceeds £3 million in a rolling 12-month period, so businesses close to the threshold should monitor their costs carefully. This test does not generally apply to construction operations carried out on a building that the business will occupy itself and does not intend to sell or let. This exclusion should be checked against the specific facts before concluding deemed contractor status applies.
Since 6 April 2026, payments to qualifying local authorities and public bodies acting as subcontractors fall outside CIS. These payments should not be verified, subjected to deductions or included on the monthly return.
Conclusion
CIS compliance comes down to a few key habits: file returns by the 19th, apply the treatment confirmed by HMRC, issue deduction statements where required and keep accurate records. Since 6 April 2026, mainstream contractors must also file a nil return or notify HMRC of inactivity when no subcontractors are paid.
Small mistakes can lead to penalties, delayed claims or missing CIS credits. Check whether a return is due, whether any statements are outstanding and whether your records are complete. If you have missed a deadline, file promptly and appeal any penalty within the allowed time where you have valid grounds.
Frequently Asked Questions
Contractor CIS returns are monthly reports showing HMRC which subcontractors were paid, the amounts reported and any CIS deductions made. They cover each CIS tax month and must reach HMRC by the 19th.
Compare the CIS deductions on your statements with your final tax and National Insurance liability. If the deductions are higher, you may be due a refund. Make sure you report your full income and claim the deductions separately through the correct process for your business.
Your main record is the payment and deduction statement. If CIS has been deducted, the contractor must provide this within 14 days after the tax month ends. Check it against your invoices, materials records and bank payments, and raise any errors promptly.
For limited companies, HMRC generally processes straightforward written CIS repayment claims within a few weeks where the figures match HMRC’s records; this can take longer if there is a mismatch or other issues requiring further correspondence. For sole traders and partnerships claiming through Self-Assessment, there is no CIS‑specific service standard, and repayment timing follows the normal Self-Assessment repayment process.
Yes, where the construction work takes place in the UK or its territorial waters, extending up to 12 nautical miles from the high-water mark. Overseas subcontractors must provide the correct details and register where required, or the higher deduction treatment may apply. Work carried out wholly outside the UK is not covered by CIS.
How UKPA Can Help?
Get Reliable Construction Industry Scheme (CIS) Assistance with UKPA.CIS compliance is crucial for any UK construction business, whether you are a main contractor, subcontractor, specialist contractor, or self-employed construction worker.
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