How to correct errors on your CIS return

Types of CIS return errors

CIS return errors generally fall into these categories:

• Wrong deduction rate applied - you deducted 20% when it should have been 0% (gross payment status), or 30% when it should have been 20%
• Incorrect UTR or National Insurance number - you entered the wrong subcontractor reference number
• Materials treatment errors - you applied CIS deduction to materials costs when you should only deduct from the labour element
• Wrong payment amount - you reported the wrong gross payment or net payment figure
• Missing subcontractor - you forgot to include a subcontractor on the return
• Duplicate entry - you included the same payment twice
• Wrong tax month - you reported a payment in the wrong period

How to correct errors - by time period

The method for correcting errors depends on when the original return was submitted.

Current and previous tax year (online amendment)

For returns submitted in the current tax year or the previous tax year, you can amend them online using the CIS online service.

Earlier tax years (contact HMRC)

For returns from more than one tax year ago, you cannot amend them online. You must contact HMRC directly.

Correcting specific error types

Wrong deduction rate

If you applied the wrong deduction rate, the correction depends on whether you deducted too much or too little.

Deducted too much:

• Amend the return to show the correct deduction
• HMRC will credit your account for the overpayment
• This reduces your next CIS payment to HMRC
• You should also correct the Payment and Deduction Statement given to the subcontractor

Deducted too little (or nothing when you should have):

• Amend the return to show the correct deduction
• Pay the additional deduction to HMRC as soon as possible
• Interest may apply from the original due date
• Consider whether you can recover the underpaid amount from the subcontractor (this depends on your contract)

Wrong UTR or National Insurance number

If you entered the wrong Unique Taxpayer Reference (UTR) or National Insurance number for a subcontractor:

• The subcontractor may not get credit for the deduction against their tax liability
• Verify the correct details using the CIS verification service before amending
• Amend the return with the correct reference number
• Issue a corrected Payment and Deduction Statement to the subcontractor

If verification fails because the subcontractor's details do not match HMRC records, the subcontractor needs to update their details with HMRC directly.

Materials treatment errors

CIS deductions should only apply to the labour element of a payment, not to materials. If you deducted CIS from the full payment including materials:

Missing subcontractor from return

If you paid a subcontractor but forgot to include them on the return:

• Verify the subcontractor if you have not already done so
• Amend the return to add the missing subcontractor and payment details
• Pay any additional deduction to HMRC
• Issue a Payment and Deduction Statement to the subcontractor promptly (the statutory deadline is within 14 days of the end of the tax month the payment relates to)

If you discover this error close to the next return deadline, you may need to include the missing payment on the current return rather than amending the old one. Contact HMRC if you are unsure.

Avoiding penalties when correcting errors

HMRC's approach to penalties depends on the nature of the error and whether you disclosed it voluntarily.

Voluntary disclosure (you find and report the error):

• No penalty for genuine mistakes if you took reasonable care
• Reduced penalties (if any) for careless errors disclosed voluntarily
• Interest still applies on late payments, but penalty may be waived

Prompted disclosure (HMRC finds the error):

• Higher penalty rates apply
• Penalties can range from 15% to 100% of the underpaid tax
• Interest applies from the original due date

What counts as reasonable care

HMRC will not normally penalise you for errors if you took reasonable care. Reasonable care includes:

• Verifying subcontractors before first payment
• Keeping accurate records of payments and deductions
• Using reliable software or systems to calculate deductions
• Reviewing returns before submission
• Seeking professional advice for complex situations
• Acting promptly when you discover errors

If HMRC does issue a penalty and you believe you took reasonable care, you can appeal.

Interest on underpaid deductions

When you correct an error that means you owe HMRC additional CIS deductions, interest is charged from when the payment was originally due.

If you overpaid deductions

When you correct an error that means you overpaid CIS deductions to HMRC:

• HMRC will credit the overpayment to your employer account
• The credit reduces your next CIS/PAYE payment due
• You do not receive interest on overpayments
• If the credit exceeds your next payment, you can request a refund

Make sure to amend the Payment and Deduction Statement given to the subcontractor so they have the correct record for their tax return.

Record keeping for error corrections

Whenever you correct a CIS return error, keep detailed records showing:

• The original return details and the error found
• When and how you discovered the error
• How you calculated the correction
• The date you made the correction
• Evidence supporting the correct figures
• Copies of amended Payment and Deduction Statements
• Any correspondence with HMRC

Keep these records for at least 3 years after the end of the tax year they relate to. Note that HMRC's assessment time limits run longer than the record-keeping minimum - normally 4 years, extended to 6 years for careless errors and 20 years for deliberate errors.

When to get professional help

Consider getting help from an accountant or tax adviser if:

• The error involves multiple tax months or years
• Large amounts of tax are involved
• You are unsure whether subcontractors were correctly verified
• Employment status questions are involved (subcontractor vs employee)
• HMRC has already contacted you about a compliance check
• You want to appeal a penalty

The cost of professional advice is often worthwhile for complex errors, particularly if penalties may apply.

Preventing future errors

To reduce the risk of CIS return errors:

• Verify every subcontractor before the first payment - and keep verification records
• Re-verify returning subcontractors if you have not paid them in the current or previous 2 tax years
• Use CIS-compatible software to calculate deductions automatically
• Separate materials and labour on subcontractor invoices before calculating deductions
• Review returns before submission - check UTRs, amounts, and deduction rates
• Set calendar reminders for the 19th filing deadline and 22nd payment deadline
• Keep good records of all payments, verifications, and statements

Related guides

• Submit your CIS monthly return - filing process and deadlines
• Verify a subcontractor's CIS status - how to verify before payment
• Calculate CIS deductions - correct calculation including materials
• Claim CIS deductions back - for subcontractors who have had deductions taken