CIS nil returns - when you must file and when you don't

As a CIS contractor, you must tell HMRC about payments to subcontractors every tax month. But what if you did not pay anyone? This guide explains when you need to file a nil return, when advance notification or an inactivity request can take its place, and how the rules changed on 6 April 2026.

Many contractors are confused about nil return requirements - and this confusion has led to unnecessary penalties. Understanding the rules now in force will help you avoid problems.

What is a nil return?

A nil return is a CIS monthly return showing that you made no payments to subcontractors during that tax month. It tells HMRC that you are still an active contractor but had no subcontractor activity in that period.

Without either a nil return or an inactivity request, HMRC assumes you have failed to report payments you have made - which triggers automatic penalties.

The rules in force (since 6 April 2026)

Under the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026 (SI 2026/289), you must do one of two things for every tax month in which you pay no subcontractors:

Option 1: Submit a nil return

File a CIS return showing zero payments. The deadline is the same as for any other return:

Option 2: Notify HMRC in advance

Instead of filing a nil return, you can notify HMRC in advance - no later than 14 days before the start of the tax month - that you will not be making subcontractor payments that month.

In practice, HMRC operates this through inactivity requests. If you expect no subcontractor payments for an extended period, you can ask HMRC to set your CIS account to inactive. An inactivity request counts as advance notification. During an inactivity period:

• You do not need to submit monthly returns (nil or otherwise)
• HMRC will not expect returns from you
• You will not receive late filing penalties for not filing
• Inactivity can last up to 6 months at a time

How to request inactivity

Use the CIS online service, or contact HMRC's CIS helpline, to request an inactivity period. You will need to provide:

• Your contractor UTR and Accounts Office reference
• The date you want inactivity to start
• How long you expect to be inactive (up to 6 months)
• The reason for inactivity (seasonal work, no current projects, etc.)

Critical requirement during inactivity

If you make ANY payment to a subcontractor during an inactivity period, you must:

1. Contact HMRC immediately to end the inactivity period
2. Submit a CIS return for that tax month by the 19th
3. Pay any deductions by the 22nd (electronic) or 19th (postal)

Failing to notify HMRC when you make payments during inactivity is treated as a missed return - you will receive the full late filing penalty.

The April 2026 change - what changed

On 6 April 2026, the rules changed. SI 2026/289 inserted the new requirements into the CIS Regulations 2005, backed by the Finance Act 2026 (sections 220 to 222).

Why did this change?

The previous relaxed system (in place since 2015, when mandatory nil returns were scrapped) caused widespread confusion:

• Contractors forgetting to notify HMRC when they start paying subcontractors again during an inactivity period
• Uncertainty about obligations - many contractors unsure whether they needed to file nil returns or request inactivity
• HMRC losing sight of contractor activity - the relaxed rules made it harder to track which contractors were genuinely inactive
• Accidental non-compliance - contractors receiving unexpected penalties when inactivity periods expired

The system now in force simplifies the position: for each month with no subcontractor payments, you either file a nil return OR notify HMRC in advance (no later than 14 days before the tax month starts) that you will not be making payments. Inactivity requests of up to 6 months remain available through the CIS online service and count as advance notification. HMRC has confirmed that penalties are only issued where contractors have neither submitted an inactivity request nor filed a return.

Comparing current and future rules

What you should do now

The new rules are in force. Take these steps to stay compliant:

Penalties for missed nil returns

The penalty structure for missed nil returns is the same as for any other late CIS return:

• 1 day late: Fixed penalty of 100 pounds
• 2 months late: Additional 200 pounds (300 pounds total)
• 6 months late: Additional 300 pounds or 5% of deductions due, whichever is greater
• 12 months late: Additional 300 pounds or 5% of deductions due, whichever is greater (higher penalties of up to 3,000 pounds or 100% apply only where information is deliberately withheld)

For nil returns (where no deductions are due), the percentage element does not bite - but the fixed penalties still apply: 100 pounds, a further 200 pounds at 2 months, and a 300 pound minimum at each of 6 and 12 months. A single nil return filed more than 12 months late can therefore attract at least 900 pounds in penalties.

If you miss multiple nil returns, each attracts its own penalty. However, HMRC has confirmed that penalties are only issued where you have neither submitted an inactivity request nor filed a return - if an inactivity request was in place, no penalty arises.

Appealing a nil return penalty

If you receive a penalty for a missed nil return, you can appeal if you have a reasonable excuse. Valid excuses include:

• Serious illness preventing you from filing
• Death of a close family member
• HMRC online service failure (if documented)
• Disaster affecting your records or ability to work

However, these are not accepted as reasonable excuses:

• Not knowing about the filing requirement
• Being too busy with other work
• Thinking you did not need to file because you had no payments
• Forgetting the deadline
• Relying on someone else to file for you

You have 30 days from receiving a penalty notice to appeal. If you miss this deadline, you must explain why your appeal is late.

Deregistering as a CIS contractor

If you no longer pay subcontractors and have no plans to do so, you can ask HMRC to remove you from the CIS contractor register. This is different from requesting inactivity - it means you are no longer a CIS contractor at all.

To deregister:

1. Contact HMRC's CIS helpline
2. Confirm you no longer use subcontractors for construction work
3. Provide your contractor UTR and Accounts Office reference

Once deregistered, you have no CIS filing obligations. However, if you later start paying subcontractors again, you must re-register as a CIS contractor before making any payments.

Important: Deregistration as a contractor does not affect any subcontractor registration you may have. If you work as both a contractor (using subcontractors) and a subcontractor (working for other contractors), these are separate registrations.

Common questions

Do I need to file a nil return if I am a subcontractor only?

No. Nil returns are only required from contractors - businesses that pay subcontractors. If you only work as a subcontractor, you have no return obligations (though you must ensure contractors verify you and deduct correctly).

What if I become a contractor mid-year?

You must file returns from the tax month in which you register as a contractor. If you register in October but do not pay any subcontractors until January, you must file nil returns for October, November, and December.

Can I still request inactivity?

Yes. HMRC continues to operate inactivity requests (up to 6 months at a time) through the CIS online service. Under the rules in force since 6 April 2026, an inactivity request functions as your advance notification that no payments will be made - it must be in place no later than 14 days before the start of the tax month it covers.

What happens if I do neither?

If you neither file a nil return nor have an inactivity request or advance notification in place, HMRC treats the return as outstanding and issues automatic late filing penalties. File the nil return as soon as possible to stop penalties escalating.