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CIS compliance quick check

Monthly CIS compliance essentials for experienced contractors. Three key actions: verify subcontractors, calculate deductions, submit your return by the 19th.

Construction & Property Running Updated 2 November 2026

Monthly CIS compliance for contractors

Three actions each month keep you compliant. Complete them in order.

Verify subcontractors (before first payment)
Verify subcontractors with HMRC under CIS

As a contractor in the Construction Industry Scheme, you must verify each subcontractor with HMRC before your first payment, and again if they have not appeared on your returns in the current or previous 2 tax years.
Quick reference: deduction rates

The rate HMRC returns during verification determines your deduction.
Registered subcontractor rate

20%

Unregistered or unverified subcontractor rate

30%

Gross payment status rate

0%

Set by

Treasury order (Finance Act 2004, s.61)

Deduction basis

Invoice total less VAT, materials, consumables, fuel and plant hire

When a contractor verifies a subcontractor, HMRC tells the contractor which rate to apply. The rates are set by Treasury order under section 61 of the Finance Act 2004 and do not change with each tax year.
20% if the subcontractor is registered for CIS and the contractor can verify them.
30% if the subcontractor is not registered with HMRC for CIS, or the contractor cannot verify them.
No deduction if HMRC has given the subcontractor gross payment status. The subcontractor receives the full payment and accounts for their own tax through Self Assessment or Corporation Tax.
The deduction is worked out on the invoice total after taking off VAT and what the subcontractor paid for materials, consumable stores, fuel (except for travelling), plant hire for the job, and manufacturing or prefabricating materials. The contractor can ask for receipts and, if there are none, estimates the cost of the materials.

What is the Construction Industry Scheme (opens in a new tab)

CIS contractor: make deductions and pay subcontractors (opens in a new tab)

CIS subcontractor: get paid under the scheme (opens in a new tab)
Calculate deductions (when paying)
Calculate CIS deductions

Apply the correct rate to the labour element only. Exclude VAT and materials before calculating.
Calculation reminder

Deductions apply to labour only - never to materials or VAT.
Calculate the CIS deduction on every payment to a subcontractor for construction work. Start with the gross invoice amount, take away what the subcontractor has paid for, then apply the rate HMRC gave you when you verified them: 20% for registered subcontractors, 30% for unregistered subcontractors and 0% with gross payment status.

Start with the gross invoice amount

Take the total invoice amount from the subcontractor, including VAT if they charge it. Take the full invoice value as quoted by the subcontractor; Note the VAT separately if the subcontractor is VAT registered; The VAT domestic reverse charge for construction services may apply to the VAT.

Take away what the subcontractor paid for

Take away the amounts the subcontractor has paid for, then deduct the CIS rate from what is left. VAT; Equipment that is now unusable (known as 'consumable stores'); Fuel used, except for travelling; Equipment hired for the job (plant hire); Manufacturing or prefabricating materials; Materials, but only if the subcontractor paid for them directly; Ask for receipts as evidence of materials; if there are none, estimate the cost; Keep records of the materials costs you take away.

Apply the deduction rate

Multiply the amount left by the rate HMRC gave you when you verified the subcontractor. 20% if the subcontractor is registered with CIS; 30% if the subcontractor is not registered; 0% if the subcontractor has gross payment status; Verify a new subcontractor before the first payment, and verify again anyone not included on a return in the current or last 2 tax years.

Work out the net payment

Pay the subcontractor the invoice less the CIS deduction. Net labour payment is the labour element minus the CIS deduction; Total to the subcontractor is net labour plus materials plus VAT; The deduction counts as an advance payment towards the subcontractor’s tax and National Insurance bill.

Record and report the deduction

Keep records for your monthly return and for the payment and deduction statement. Subcontractor name and UTR; Gross amount of the payment, excluding VAT; Costs of materials; Deduction made; Verification number from HMRC; Give a payment and deduction statement within 14 days of the end of the tax month; File the monthly return by the 19th of the following month; Pay deductions to HMRC by the 22nd (electronic) or 19th (post).

CIS deduction formula
CIS deduction = (Invoice - VAT - Materials and other costs the subcontractor paid for) x Deduction rate
Worked example
A registered subcontractor (20% rate) sends an invoice for plastering work.

Invoice total, excluding VAT

£1,000

VAT at 20%

£200

Materials cost (with receipts)

£200

Subcontractor status

Registered (20% deduction rate)

Invoice amount excluding VAT: £1,000.
Take away the materials: £1,000 - £200 = £800 (the labour element).
Apply the 20% rate: £800 x 0.20 = £160.
Pay £160 to HMRC as the CIS deduction.

Labour element

£800

CIS deduction (20%)

£160

Net labour payment

£640

Materials (passed through)

£200

VAT (passed through)

£200

Total to subcontractor

£1,040

CIS paid to HMRC

£160

Total contractor outlay

£1,200

The subcontractor receives £1,040 (net labour £640 plus materials £200 plus VAT £200). You pay £160 to HMRC as the CIS deduction, so your total outlay is £1,200. The subcontractor can set the £160 against their tax and National Insurance bill.

CIS contractor - make deductions and pay subcontractors (opens in a new tab)

Use the CIS online service (opens in a new tab)
Submit monthly return (by the 19th)

Submit CIS monthly return

File your CIS300 by the 19th of the month following each tax month. Pay deductions by the 22nd.

Filing deadlines

Tax months run 6th to 5th. Returns due by 19th; payments by 22nd.

Tax month definition

6th of one month to 5th of the following month

Monthly return deadline

19th of the month following the tax month

Electronic payment deadline

22nd of the month following the tax month

Postal payment deadline

19th of the month following the tax month

Payment and deduction statement (PDS) deadline

Within 14 days of end of each tax month

CIS returns cover a tax month which runs from the 6th of one month to the 5th of the next. For example, the return for 6 May to 5 June must be filed by 19 June. If paying CIS deductions electronically (including by Direct Debit, Bacs, or CHAPS), the deadline is the 22nd. If paying by post, the deadline is the 19th. You must give subcontractors a payment and deduction statement within 14 days of the end of each tax month.

File your CIS monthly returns (opens in a new tab)

Key deadlines each month

Action Deadline

Tax month ends 5th

Submit CIS return 19th

Pay deductions (electronic) 22nd

Tip: Set calendar reminders for the 15th to start preparing your return.

gov.uk
CIS online service (opens in a new tab)

Verify subcontractors, file returns, and manage your CIS account

gov.uk
File your monthly CIS returns (opens in a new tab)

HMRC guidance stating the 19th-of-the-month deadline and the £100 penalty for filing one day late.

Late filing penalties

Missing the 19th triggers automatic penalties starting at £100.

HMRC charges a penalty if you file a CIS monthly return late. Under Schedule 55 to the Finance Act 2009 the penalties build up as the return stays overdue. You are charged £100 when the return is late, and a further £200 once it is 2 months late, so £300 in total by then. The £200 is added to the £100, not charged instead of it. Penalties at 6 and 12 months, and any further penalty for returns later than that, are charged on top of those.

Late filing

£100

2 months late

A further £200 (£300 in total)

6 months late

£300 or 5% of CIS deductions, whichever is higher

12 months late

£300 or 5% of CIS deductions, whichever is higher

Returns later than this

Up to £3,000 or 100% of CIS deductions, whichever is higher

Late payment

Interest plus late payment penalties

Failure to produce CIS records

Up to £3,000

Pay or appeal a penalty

Within 30 days of the date on the penalty notice

Pay a CIS late filing penalty (opens in a new tab)

Official guidance

CIS contractor obligations on GOV.UK (opens in a new tab)

HMRC

Action	Deadline
Tax month ends	5th
Submit CIS return	19th
Pay deductions (electronic)	22nd

CIS compliance quick check

Monthly CIS compliance for contractors

Verify subcontractors (before first payment)

Verify subcontractors with HMRC under CIS

Calculate deductions (when paying)

Calculate CIS deductions

Submit monthly return (by the 19th)

Submit CIS monthly return

Key deadlines each month

CIS online service (opens in a new tab)

File your monthly CIS returns (opens in a new tab)

Official guidance

Next steps

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