The Construction Industry Scheme (CIS) puts a monthly filing obligation on contractors and a deduction regime on payments to subcontractors. The deadline never moves — the 19th of every month — and the penalties for missing it start at £100 and stack fast, even for a month with no payments at all. This guide explains who files, the deadline, the deduction rates, when a nil return is needed, and the late filing penalty schedule.
Contractor or subcontractor — who files?
Under CIS the contractor files the monthly return, not the subcontractor. A contractor is a business that pays subcontractors for construction work; a subcontractor is a business that is paid to do that work. Crucially, a business can be both — paying its own subcontractors (contractor obligations) while being paid by a larger firm (subcontractor treatment) at the same time.
There is also the deemed contractor: a non-construction business — a retailer, a manufacturer, a landlord — whose expenditure on construction operations exceeds £3 million in the rolling 12-month period becomes subject to contractor obligations even though construction is not its trade.
The monthly return deadline
CIS runs on tax months that end on the 5th. The contractor must file the monthly return — reporting payments to subcontractors and deductions made — by the 19th of the month, covering the tax month that ended on the 5th. So payments in the tax month ending 5 August are reported on the return due 19 August. The CIS deduction is then paid over to HMRC with PAYE: by the 22nd if paying electronically, or the 19th by post.
Verification and deduction rates
Before paying a new subcontractor, the contractor must verify them with HMRC. Verification sets the deduction rate the contractor applies to the labour element of payments:
| Status | Deduction rate |
|---|---|
| Registered for gross payment status | 0% |
| Registered as a CIS subcontractor | 20% |
| Not verified / not registered | 30% |
Deductions are taken from the labour portion only, not from the cost of materials. If the contractor applies the wrong rate — for example, paying gross a subcontractor who should have suffered 20% — the contractor is liable for the under-deducted amount, not the subcontractor. That makes verification a real risk point, not a formality.
Nil returns: filing when there were no payments
A contractor that made no payments to subcontractors in a tax month must still either file a nil return or tell HMRC the business will be inactive for a period — otherwise HMRC expects a return and issues a £100 late filing penalty for the "missing" one. The two options: submit a nil return each affected month, or notify inactivity (which suspends the filing requirement for up to six months). Either avoids the penalty; doing nothing does not.
Late filing penalties
CIS late filing penalties escalate with how late the return is, and they apply per return — so several missed months compound:
| How late | Penalty |
|---|---|
| 1 day late | £100 |
| 2 months late | £200 |
| 6 months late | The greater of £300 or 5% of the CIS deductions on the return |
| 12 months late | A further £300 or 5% — higher where information is withheld |
Because the penalties are per monthly return, a contractor who overlooks CIS for a quarter can face several hundred pounds in penalties before the deductions themselves are even considered.
How subcontractors recover deductions
Deductions suffered by a subcontractor are advance payments towards their own tax and National Insurance. A limited-company subcontractor sets the CIS suffered against its PAYE/CIS liabilities through the payroll (EPS); a sole trader or partnership claims it through Self Assessment. Keeping accurate deduction statements is what makes that reclaim clean.
Staying on top of CIS across clients
The deadline is the same date every month, which sounds easy — but for a practice with several contractor clients it means the 19th is a recurring monthly pinch point, with nil returns just as mandatory as active ones. Tracking which clients have a CIS obligation each month, and flagging the 19th in advance, prevents the silent £100 penalties that a forgotten nil return generates.
Guides in this series
This guide is the hub for our detailed Construction Industry Scheme articles:
Detailed guides in this series are publishing through 2026 — check back soon, or use the deadline checker below in the meantime.
PenaltyProof tracks the CIS monthly return deadline for every contractor client — alongside PAYE, Companies House and their other obligations — so the 19th never slips. Try Starter (£29/month, up to 50 companies) free for 30 days with advance alerts 30 days, 14 days, and 7 days before each deadline, plus due-date and overdue alerts. Cancel any time during the trial.
Start 30-day free trial →or monitor free for up to 5 companies with Companies House monitoring (no card).
This is general information, not advice — check the current GOV.UK guidance, or a client's specific position with a qualified accountant, before acting.
Sources
GOV.UK — Construction Industry Scheme (CIS): https://www.gov.uk/what-is-the-construction-industry-scheme
GOV.UK — What you must do as a CIS contractor: https://www.gov.uk/what-you-must-do-as-a-cis-contractor
GOV.UK — Construction Industry Scheme: penalties for late returns: https://www.gov.uk/government/publications/construction-industry-scheme-penalties-for-late-returns