The Construction Industry Scheme (CIS) is a set of regulations designed to reduce tax evasion within the UK construction sector. Under CIS, contractors are legally required to deduct tax from payments made to subcontractors and pass these deductions to HM Revenue & Customs (HMRC). Alongside making deductions, contractors must submit a CIS monthly return to HMRC, detailing who they have paid, how much was paid, and what deductions were made.
In this article, we explain what a CIS monthly return is, who needs to file it, how to file it with HMRC, and the consequences of failing to comply.
Understanding the Construction Industry Scheme (CIS)
The CIS applies to contractors and subcontractors operating in the UK construction industry. Under CIS, a contractor must deduct tax from a subcontractor’s payments and forward it to HMRC. These deductions count as advance payments towards the subcontractor’s tax and National Insurance liabilities.
The scheme was introduced to tackle tax avoidance in the construction sector and ensure that taxes are collected at the source of payment.
A key requirement under CIS is the obligation for contractors to complete and submit a CIS monthly return. This return ensures that HMRC receives a full report of subcontractor payments, deductions made, and confirmations that workers are correctly classified.
What is a CIS Monthly Return?
A CIS monthly return is a report submitted by contractors to HMRC each month. It lists all payments made to subcontractors during the tax month and any deductions taken under CIS.
The return also requires the contractor to declare that all subcontractors listed are genuinely self-employed and not employees. Providing incorrect employment status could result in a penalty of up to £3,000.
By filing a CIS monthly return, contractors keep HMRC informed about subcontractor payments and tax deductions, maintaining transparency and fulfilling compliance obligations.
Who Needs to File a CIS Monthly Return?
You must file a CIS monthly return if you are a contractor paying subcontractors to carry out construction work on your behalf. This includes businesses directly engaged in construction, such as:
- Builders
- Labour agencies
- Gangmasters
- Property developers
You are classed as a mainstream contractor if your business is construction-based and you pay subcontractors. However, HMRC may also classify you as a deemed contractor if construction is not your main business, but you spend more than £3 million on construction in a 12-month period. This applies to organisations like:
- Housing associations or ALMOs
- Local authorities
- Government departments
Once you meet the criteria for being a contractor under CIS, you are legally required to register with HMRC and submit monthly returns.
Registering as a Contractor under CIS
Before you pay your first subcontractor, you must register with HMRC as a CIS contractor. This may involve setting up as a new employer with HMRC if you haven’t already done so. Once registered, HMRC will issue your employer PAYE reference number.
Contractors must also assess whether their subcontractors are genuinely self-employed. Assuming subcontractors are self-employed without assessing their employment status poses a significant tax risk. If HMRC determines that a subcontractor should have been treated as an employee, you could be liable for unpaid income tax, National Insurance, and penalties.
Once registered, you are responsible for deducting tax from subcontractor payments, filing monthly returns, and keeping accurate CIS records.
Keeping CIS Records
Under CIS, contractors must keep detailed records of all CIS transactions. These records should include:
- The gross amount of each payment invoiced by subcontractors (excluding VAT)
- The amount deducted from each payment
- Any materials costs invoiced by subcontractors (excluding VAT)
CIS records must be retained for at least three years after the end of the tax year they relate to. HMRC can request access to these records at any time, and failure to provide them could result in a penalty of up to £3,000.
Filing Monthly CIS Returns
Each month, contractors must file a CIS return with HMRC to report subcontractor payments and deductions. Returns must be filed by the 19th of the month following the end of the tax month. For example, a return covering 6 January to 5 February must reach HMRC by 19 February.
Returns can be submitted:
- Using HMRC’s CIS online service
- Through approved commercial CIS software
On each return, you must confirm that the subcontractors listed are not employees. Incorrect classification could lead to a £3,000 penalty.
If You Made No Payments
If you did not pay any subcontractors during a tax month, you do not need to file a return but must notify HMRC that no return is due. You can notify HMRC by:
- Using the CIS online service
- Calling HMRC
- Writing to HMRC
If you expect not to use subcontractors temporarily, you can request inactivity status from HMRC via the CIS online service, pausing your filing obligation for up to six months. If you resume using subcontractors sooner, you must notify HMRC immediately.
Using Commercial CIS Software
If you use commercial CIS software to file returns, your return must not include any negative values. If a calculation results in a value below zero, you must enter it as zero. HMRC may later request details of any adjusted entries, so it’s essential to maintain clear records supporting these adjustments.
Monthly CIS Return Deadlines and Penalties
The deadline for filing your monthly return is the 19th of the month following the tax month end. Missing this deadline results in automatic penalties:
| Delay | Penalty |
| 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) |
| Beyond 12 months | Up to £3,000 or 100% of CIS deductions (whichever is higher) |
If you disagree with a penalty, you can appeal within 30 days of the notice date:
- Via HMRC’s online service (which also tracks the appeal’s progress)
- By writing to HMRC, quoting your UTR and the payment reference on the notice
Important to note: appeals cannot be made by phone.
Correcting or Changing CIS Returns
If you need to correct or change a CIS return, you can do so through the HMRC CIS online service. If you need assistance, you can call the HMRC CIS helpline for support.
Making CIS Payments to HMRC
When you register as a contractor, HMRC will set up a CIS payment account. If you already have employees, HMRC will convert your existing PAYE scheme to a PAYE/CIS scheme.
You must pay any deductions made under CIS to HMRC by the 22nd of each month (or 19th if paying by post). Payment is made in the same way as PAYE and National Insurance payments.
If your combined PAYE, NIC, and CIS liabilities average less than £1,500 per month, you may qualify to pay quarterly rather than monthly—but you must still file monthly CIS returns.
Make CIS Returns Easy and Error-Free with Planyard
Submitting your CIS monthly return isn’t just about filing a form—it depends on having accurate, organized records of every subcontractor’s payments and deductions. With Planyard, you get a centralized solution that automatically tracks subcontractor payments, calculates deductions, and keeps detailed CIS-ready records for every transaction that have the correct CIS rates assigned in your accounting software.
By replacing manual spreadsheets with real-time financial tracking, Planyard ensures your CIS returns are backed by accurate data—reducing the risk of penalties for errors. You’ll save hours on admin, stay compliant, and have complete confidence every month when filing with HMRC.
Start your free 14-day trial today and keep your projects profitable and on track.