Before you pay any subcontractor
- Verify the subcontractor with HMRC - online via your CIS account, or by phone. HMRC returns the correct deduction rate (0% gross, 20% registered, 30% unregistered).
- Keep the verification reference - HMRC issues a reference number that's valid for the tax year.
- Issue a payment and deduction statement to the subcontractor at each pay run, showing gross amount, materials, labour, deduction.
Filing the monthly return
- Sign in to your HMRC CIS account at gov.uk.
- Select 'Submit a CIS return' for the relevant tax month (the 6th of one month to the 5th of the next).
- List every subcontractor paid in that period: UTR/verification reference, gross payment, materials cost, labour cost, deduction.
- Submit by the 19th of the month following the tax month end.
- Pay the deductions to HMRC by the 22nd electronically.
Even a 'nil' return must be filed if you've registered as a contractor but didn't pay anyone in a given month. Missing nil returns triggers the same £100 penalty.
Penalties
| Lateness | Penalty |
|---|---|
| 1 day late | £100 |
| 2 months late | £200 |
| 6 months late | £300 or 5% of CIS deductions (whichever is higher) |
| 12 months late | Additional £300 or 5% (deliberate-late penalty up to 100%) |
Penalties stack monthly. A single year of missed returns can cost £1,500+ in penalties before any tax is owed.
Common mistakes
- Forgetting to file nil returns in months you didn't pay anyone
- Not verifying subcontractors before paying - results in 30% deduction even if they're registered
- Mixing materials and labour - if you don't separate them, the whole gross amount becomes subject to CIS
- Missing the 22nd payment deadline for deductions - HMRC charges interest from day one
- Not issuing payment and deduction statements - subcontractors can't claim refunds without them
FAQ
Frequently asked questions
Can I file CIS returns through my accounting software?+
Yes - most modern accounting tools (Xero, FreeAgent, QuickBooks) integrate with HMRC's CIS API. Your accountant typically files via this route to reduce manual error.
What if I made a mistake on a previous return?+
You can amend a CIS return up to 6 years after the tax month. Login to your CIS account, locate the return, and submit an amendment. Significant corrections may trigger HMRC questions.
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