If you work in the UK construction industry—whether as a contractor, subcontractor, or a growing construction business—you’ve probably heard the term CIS return more times than you can count. But understanding what it actually means, why HMRC requires it, and how to file it correctly can feel confusing at first.
So, let’s break it down in the simplest way possible.
What Exactly Is a CIS Return?
A CIS return is a monthly report that contractors must submit to HMRC under the Construction Industry Scheme (CIS).
Its purpose is simple:
HMRC wants to ensure contractors are deducting and reporting tax from subcontractors correctly.
Whenever a contractor pays a subcontractor, they must deduct a percentage of the payment as tax and send that amount to HMRC. The CIS return is how contractors report:
- Who they paid
- How much they paid
- What tax they deducted
- Whether the subcontractor was verified
- Any changes, corrections, or special cases
Think of it as HMRC’s way of making sure everything stays transparent and compliant.
Who Needs to File a CIS Return?
You must file CIS returns if:
- You are a contractor who hires subcontractors for construction work in the UK.
- You are counted as a deemed contractor (non-construction business spending £3M+ on construction within 12 months).
If you only work as a subcontractor, you don’t file CIS returns. Instead, contractors deduct CIS tax from your payments and report it on their returns.
Why CIS Returns Matter
CIS returns matter because they help HMRC keep track of tax deductions made under the scheme. Accurate returns ensure:
- Subcontractors get credit for the tax already deducted
- Contractors stay compliant and avoid penalties
- Payments stay transparent across the industry
- HMRC reduces tax evasion in construction—a high-risk sector
In short, CIS returns protect both sides by keeping everything clean and recorded.
What Information Goes Into a CIS Return?
A typical CIS return includes:
1. Subcontractor Details
- Name
- Unique Taxpayer Reference (UTR)
- Verification number (if applicable)
2. Payment Information
- Gross amount paid before VAT
- Cost of materials supplied
- Amount subject to CIS
- Tax deducted (20%, 30%, or 0% for gross status subcontractors)
3. Verification Status
Before paying a subcontractor for the first time, contractors must verify them with HMRC. HMRC then decides whether deductions should be at:
- 20% (registered – HMRC has verified their details and they are properly registered under CIS)
- 30% (unverified – HMRC couldn’t match their details or they aren’t registered under CIS)
- 0% (gross payment status – approved to receive full payments with no deductions because of good tax history)
4. Monthly Declarations
The contractor must confirm they:
- Checked subcontractor employment status
- Ensured payments were made under CIS rules
- Provided deduction statements to subcontractors
A CIS return is basically a complete report of monthly activity with subcontractors.
When Do You Need to File a CIS Return?
CIS returns must be filed every month, even if no subcontractors were paid.
Key deadlines:
- Return period: 6th of one month to the 5th of the next
- Submission deadline: By the 19th of every month
- Payment deadline: By the 22nd of every month (if paying electronically)
For example: Payments made from 6th Jan to 5th Feb must be reported by 19th Feb.
How to File a CIS Return
You can file CIS returns through:
1. HMRC Online Services
Contractors with simple structures can use HMRC’s website to file manually.
2. Accounting Software
Xero, Sage, QuickBooks, FreeAgent, and other tools let you:
- Add subcontractors
- Record deductions
- Generate CIS returns
- File directly to HMRC
This is the easiest way for contractors with multiple subcontractors.
3. Your Accountant or Bookkeeper
Most construction businesses outsource CIS because:
- It reduces mistakes
- Keeps records clean
- Prevents late filing penalties
If your CIS work includes many subcontractors or complex deductions, outsourcing is often the best choice.
Penalties for Late or Incorrect CIS Returns
HMRC takes CIS compliance seriously and issues penalties even if you had “nil” activity.
Late Filing Penalties
- 1 day late: £100
- 2 months late: £200
- 6 months late: £300 or 5% of CIS deductions (whichever is higher)
- 12 months late: £300 or 5% of CIS deductions (whichever is higher) — fines may increase if HMRC believes the delay was deliberate
These penalties add up quickly, especially for contractors who forget to file a nil return.
Incorrect Filing Penalties
HMRC may also charge penalties if:
- Subcontractor details are wrong
- Deductions are misreported
- Verification wasn’t performed
- Employment status checks were skipped
Keeping accurate records is the simplest way to avoid penalties.
What Is a “Nil” CIS Return?
A nil return means: You had no subcontractor payments during the month—but still must file a return.
Skipping a month still triggers penalties. HMRC expects consistency, whether you had activity or not.
How CIS Works for Subcontractors
While subcontractors don’t file CIS returns themselves, the scheme still affects them.
- Contractors deduct tax at 20% or 30% from their payments
- Subcontractors receive a monthly deduction statement
- This deducted tax counts as advance tax toward their Self Assessment
- Subcontractors often end up with refunds at year-end because too much tax was deducted
CIS returns help HMRC track these deductions accurately.
Common CIS Mistakes Contractors Make
To keep compliance simple, avoid these common errors:
- Not verifying subcontractors before first payment
- Miscalculating tax when materials are included
- Missing the 19th deadline
- Skipping nil returns
- Entering wrong UTR or verification numbers
- Treating workers as subcontractors when they should be employees (IR35 concerns)
A single mistake can delay payments, create mismatched records, or trigger HMRC checks.
Why Many Contractors Outsource CIS Work
Construction bookkeeping can get heavy fast, especially if you work with multiple subcontractors or run multiple projects at once. That’s why many contractors prefer hiring a bookkeeper or accountant.
Outsourcing CIS gives you:
- Accurate monthly returns
- Fewer HMRC penalties
- Clean subcontractor records
- Verified tax deductions
- Proper compliance with CIS + employment status rules
- More time to focus on projects instead of paperwork
For businesses growing in size, outsourcing often becomes a smarter long-term decision.
Here’s a complete guide on choosing the right accountant for your business so you can choose the best one for you.
Conclusion
A CIS return is simply a monthly report that contractors must send to HMRC showing how much they paid subcontractors and how much tax they deducted. The key is consistency—file every month, verify subcontractors, and keep clean records.
When done right, CIS compliance is smooth and straightforward. When ignored, the penalties can get expensive very quickly.
