The Contractor's Guide to CIS Obligations
Updated: Aug 24
Key Takeaways
If you pay subcontractors for construction work, you're a CIS contractor and must verify them, deduct the right tax, file a monthly return, issue statements, and pay HMRC.
You must verify each subcontractor with HMRC before their first payment; verification sets the rate at 20%, 30%, or 0%.
The monthly return (CIS300) is due by the 19th, subcontractor statements within 14 days of the tax month ending, and deductions paid to HMRC by the 22nd (electronic).
Deductions come off labour only — never materials, VAT, plant, or fuel.
Late returns carry automatic penalties starting at £100, per return — and even a month with no payments needs a nil return or a declaration of inactivity.
If your business pays subcontractors to carry out construction work, you're a contractor under the Construction Industry Scheme, and you take on four recurring duties each tax month: deduct the correct tax from their labour, file a monthly return, give each one a payment and deduction statement, and pay the deductions to HMRC. Miss any of them and the penalties are automatic. Here's the full routine.
Are you a CIS contractor?
You're a contractor if you pay subcontractors for construction work — that includes builders, developers, and civil engineering firms. You must register as a contractor before your first payment and operate the scheme. Subcontractors, by contrast, don't file monthly returns — their tax is handled through Self Assessment or Corporation Tax. Note that you can be a contractor and subcontractor at the same time, in which case you need to register as contractor.
CIS obligations of a contractor
1. Verify every subcontractor before you pay them
Before the first payment to any subcontractor, verify them with HMRC through the CIS online service or your CIS software, using their exact name and UTR. HMRC confirms the correct deduction rate:
20% for registered, verified subcontractors
30% where the subcontractor isn't registered or can't be matched
0% for those with gross payment status
Keep the verification reference — you'll need it if there's ever a dispute. You must also re-verify anyone you haven't paid, or included on a return, in the current or previous two tax years. Crucially, the responsibility for using the right rate sits with you: if the wrong rate is applied because verification wasn't done properly, HMRC holds the contractor liable, not the subcontractor.
2. Deduct the right amount — from labour only
Apply the verified rate to the labour element only. An invoice that separates labour from materials makes this straightforward; one that lumps everything together is where mistakes happen. Deducting from materials is one of the most common CIS errors and causes real cash-flow disputes with subcontractors. Pay the subcontractor the balance after deduction.
3. File your monthly return (CIS300) by the 19th
Your monthly return lists every subcontractor you paid in the tax month, the gross amount, any materials, and the tax deducted. File it with HMRC by the 19th of the month following the tax month — so payments made between 6 March and 5 April are reported by 19 April. The 19th deadline doesn't move for weekends or bank holidays; the return must reach HMRC by then regardless. The return also includes a declaration that you've considered the employment status of your subcontractors — a reminder that CIS doesn't settle whether someone is genuinely self-employed.
4. Issue payment and deduction statements within 14 days
Every subcontractor you deducted from must receive a payment and deduction statement within 14 days of the end of the tax month. It shows your details, the subcontractor's, the gross payment, any materials, and the tax deducted. They need it to reclaim their deductions, and you're legally required to provide it.
5. Pay the deductions to HMRC by the 22nd
Pay the tax you've deducted to HMRC by the 22nd if paying electronically (the 19th by post). This is the subcontractors' tax money. Smaller contractors whose average monthly PAYE and CIS liabilities are under £1,500 can opt to pay quarterly instead.
Your monthly deadlines at a glance
Duty | Deadline |
Verify a subcontractor | Before their first payment |
File the CIS300 return | 19th of the month after the tax month |
Issue payment and deduction statements | Within 14 days of the tax month ending |
Pay deductions to HMRC | 22nd (electronic) / 19th (post) |
Nil months: you still have to act
If you paid no subcontractors in a tax month, you can't simply skip the return. You must either file a nil return or tell HMRC no return is due — you can declare a period of inactivity for up to six months if you won't be paying anyone. Do nothing and you'll get the same late-filing penalty as if you'd missed a normal return.
Penalties for late returns
Late CIS return penalties are automatic and escalate quickly. They apply per return, so several late months stack up fast:
How late the return is | Penalty |
1 day | £100 |
2 months | £200 |
6 months | £300, or 5% of the deductions, whichever is higher |
12 months | A further £300 or 5%, whichever is higher — up to £3,000 (or 100% of deductions) in serious cases |
On top of these, late payment of deductions to HMRC attracts interest and can carry its own penalties. HMRC has also tightened its CIS compliance and enforcement from April 2026, so make you budget for payments in advance and start your return as early as possible.
Records you must keep
Keep your CIS records — verification references, gross payment amounts, materials figures, deductions, and copies of returns and statements — for at least three years after the end of the tax year they relate to. HMRC can inspect them, and can open enquiries going back several years, so many contractors keep six years' worth to be safe. Failing to keep adequate records can itself trigger a penalty of up to £3,000. Oof.
Frequently Asked Questions
What are a contractor's main CIS obligations? You must verify your subcontractors with HMRC, deduct the correct tax from their labour, file a monthly CIS return (the CIS300) by the 19th, give each subcontractor a payment and deduction statement within 14 days, and pay the deductions to HMRC by the 22nd if paying electronically. You must also keep proper records and file a nil return or declare inactivity in months you pay no one.
When is the CIS return due? By the 19th of the month following the tax month. Tax months run from the 6th to the 5th, so payments made between 6 March and 5 April must be reported by 19 April. The deadline doesn't shift for weekends or bank holidays — HMRC must have the return by the 19th, and a return even one day late triggers an automatic £100 penalty.
Do I have to file a CIS return if I paid no subcontractors? Yes, in effect. You must either file a nil return or tell HMRC that no return is due — you can declare a period of inactivity for up to six months if you won't be paying subcontractors. If you simply do nothing, HMRC treats it as a missed return and issues the same £100 penalty.
What are the penalties for a late CIS return? £100 as soon as the return is a day late, £200 at two months, then the higher of £300 or 5% of the deductions at six months, and again at twelve months — with penalties of up to £3,000 in serious cases. They apply per return, so multiple late months add up quickly, and late payment of the deductions carries interest on top.
Do I have to give subcontractors a statement? Yes. Every subcontractor you deduct tax from must receive a payment and deduction statement within 14 days of the tax month ending. It evidences the tax you've withheld and is what they use to reclaim it, so it's a legal requirement, not a courtesy. If you're unsure your monthly process is watertight, a construction-specialist accountant can run the whole cycle for you.
Let us run your CIS for you
The monthly CIS cycle is unforgiving — verify, deduct, file, issue, pay, with automatic penalties for slips. Talk to the SiteLedger team on 01706 595 370 and we'll handle your subcontractor verification, monthly returns, statements, and payments, so nothing's ever late. As construction-specialist accountants, running CIS for contractors is exactly what we do.
Written by the SiteLedger team — construction-specialist accountants. Last reviewed: July 2026. Rules and figures apply to the 2026/27 UK tax year. This is general guidance, not personal tax advice; speak to us about your specific obligations.