Fix CIS payment errors

CIS troubleshooting guide

Mistakes happen with CIS - the important thing is fixing them quickly and correctly. Whether you are a contractor who has applied the wrong deduction rate or a subcontractor who needs to claim back over-deducted tax, this guide will help you resolve the issue.

Choose your problem:

• Applied the wrong deduction rate
• Missed verification before payment
• Late return filed or missed deadline
• Wrong subcontractor details on return
• Subcontractor - claiming back deductions
• Received incorrect Payment and Deduction Statement
• When to contact HMRC

Applied the wrong deduction rate

This is the most common CIS error. If you have deducted 30% when you should have deducted 20% (or vice versa), the fix depends on whether you have already submitted your monthly return.

If you have NOT yet submitted the monthly return

1. Re-verify the subcontractor - Check their current status with HMRC using the CIS online service
2. Correct your records - Update the payment record with the correct deduction
3. Adjust the net payment - Either pay the subcontractor the difference or agree to adjust the next payment
4. Submit the return - File with the correct figures

If you HAVE already submitted the return

1. Amend the return online - Use the CIS online service to correct returns from the current or previous tax year
2. Adjust with the subcontractor - If you over-deducted, pay them the difference. If you under-deducted, agree how to recover the shortfall
3. Pay any additional tax due - If you under-deducted, pay the difference to HMRC promptly to avoid interest

For earlier tax years: Contact HMRC's CIS helpline to amend returns from more than one tax year ago.

Missed verification before payment

If you paid a subcontractor without verifying them first, you should have applied the 30% rate. If you applied a lower rate, you may owe HMRC the difference.

Steps to fix

1. Verify immediately - Complete verification now to confirm the correct rate
2. Check what you deducted - Compare the rate you applied against what verification shows
3. If you under-deducted - You are liable to HMRC for the difference. Pay the shortfall and amend your return
4. If you correctly applied 30% - No action needed if verification confirms 30% was correct. If they should have been 20% or 0%, the subcontractor claims the excess back through their tax return

Going forward: Always verify before the first payment to avoid this situation.

Late return filed or missed deadline

CIS returns are due by the 19th of the month following the tax month. If you have missed the deadline, penalties apply automatically - but you can appeal if you have a reasonable excuse.

What to do now

1. Submit the return immediately - File now to stop penalties accumulating
2. Pay any deductions owed - Pay by the 22nd to minimise interest charges
3. Wait for the penalty notice - HMRC will send a penalty notice after processing your late return
4. Consider an appeal - If you have a reasonable excuse, appeal within 30 days

Reasonable excuse for late filing

HMRC may accept appeals for:

• Serious illness preventing you from filing
• Death of a close family member
• Fire, flood, or theft affecting your records
• HMRC system outage (if you can document it)

Excuses that are not accepted: being too busy, relying on someone else to file, not knowing about the deadline.

Wrong subcontractor details on return

If you entered incorrect details for a subcontractor on your CIS return (wrong UTR, incorrect payment amount, or wrong materials figure), you need to amend the return.

How to amend

1. Current or previous tax year: Use the CIS online service to amend the return directly
2. Earlier tax years: Contact HMRC's CIS helpline on 0300 200 3210

Financial implications

• If you under-reported deductions: Pay the additional amount to HMRC. Interest runs from the original due date
• If you over-reported deductions: HMRC credits your account. This reduces your next payment

Keep records of all amendments made and why.

Subcontractor - claiming back deductions

If you are a subcontractor and too much CIS tax has been deducted, you can claim it back. The process depends on your business structure.

If your contractor deducted the wrong rate

First, ask the contractor to:

1. Verify your CIS status with HMRC
2. Amend their CIS return if they have already filed
3. Pay you the difference if they over-deducted

If the contractor will not correct the error, you can still claim the full amount back through your tax return. HMRC's records show what was actually paid to them.

Sole traders and partnerships

Claim through your Self Assessment tax return:

• Enter total CIS deductions in box 38 (SA103S short form) or box 81 (SA103F full form) - check the current year's form notes as box numbers can change
• HMRC offsets deductions against your tax liability
• Any excess is refunded (typically 4-6 weeks after processing)

Deadline: File by 31 January following the tax year end.

Limited companies

Important: Limited companies should report CIS deductions through payroll during the tax year.

1. Report CIS deductions on your monthly Employer Payment Summary (EPS)
2. HMRC offsets deductions against your PAYE and employer NI liability
3. Pay only the balance each month
4. If you have excess deductions at year end (5 April), claim a refund from HMRC or ask HMRC to set the excess against Corporation Tax due

Received incorrect Payment and Deduction Statement

If the Payment and Deduction Statement (PDS) from your contractor shows incorrect figures:

1. Check your invoice - Confirm what you invoiced and what was paid
2. Contact the contractor - Ask them to check their records and issue a corrected statement
3. Request they amend their CIS return - If they have already filed with HMRC using wrong figures

If the contractor refuses to correct the error:

• Keep records of what was actually paid and deducted
• Enter the correct figures on your tax return
• Keep evidence in case HMRC queries the discrepancy

If you never received a PDS: You are entitled to one within 14 days of the end of each tax month. Request it in writing. You can report contractors who repeatedly fail to provide statements to HMRC.

When to contact HMRC

Contact HMRC's CIS helpline for issues you cannot resolve yourself:

When to call:

• Amending returns from more than one tax year ago
• Disputes about penalty amounts
• Subcontractor registration status issues
• Gross payment status applications or queries
• Complex situations involving multiple contractors or tax years
• If your business is going into administration or liquidation

Before you call: Have your Unique Taxpayer Reference (UTR), employer PAYE reference (if applicable), and details of the specific issue ready.

Preventing future CIS errors

Most CIS problems can be avoided with good processes:

Getting professional help

Consider using an accountant or payroll provider for CIS if:

• You have multiple subcontractors and frequent payments
• You have received multiple penalties and want to get back on track
• You are facing an HMRC compliance check
• Your situation is complex (both contractor and subcontractor, deemed contractor status, etc.)
• You want to apply for or maintain gross payment status

An accountant can also help if you need to correct historical errors across multiple tax years.