Common CIS Mistakes and How Contractors Can Fix Them
UK contractors working in construction will inevitably face headaches over the Construction Industry Scheme (CIS) from time to time. CIS mistakes are surprisingly common, and even small errors can end up costing time and money, or even leave you facing action from HMRC. Here, we outline some of the most frequent mistakes that contractors make, and advise on how to fix them.
- Not verifying subcontractors
Before paying a subcontractor, you must verify them with HMRC. This is a requirement, and will ensure the right amount of tax is deducted. Failure to verify subcontractors can lead to penalties.
Fix the error by using HMRC’s online service or CIS friendly accounting software such as Xero to verify new subcontractors. If you have already paid without verification, go back and check their status, then amend your CIS returns if necessary and inform HMRC. It’s worth keeping a clear record of each verification for your files.
- Incorrect tax deductions
The amount of tax that is deducted depends on whether a subcontractor is registered, unregistered or on gross payment status. Guessing or using the wrong rate means you’ll pay the incorrect amount of tax.
If you’ve used the wrong rate, don’t ignore it; HMRC will spot the mismatch and you could face action. Instead, update your records as soon as possible and submit a corrected CIS return. Avoid the error in future by double checking every subcontractor’s verification status.
- Missing the CIS return deadline
CIS returns are due on the 19th of every month, and HMRC charges a penalty for each day it is late. For those juggling jobs, paperwork and personal admin, it’s easy to forget.
You can avoid missing the deadline in several ways: by setting a calendar reminder each month, automating the return or seeking help from an accountant. If you have already missed a deadline, file the return as soon as possible.
- Not providing payment and deduction statements
Every time a subcontractor is paid, they must be given a payment and deduction statement. This proves how much CIS tax was deducted and helps subcontractors to complete their returns.
If you’ve failed to provide a statement to a subcontractor, ensure it’s sent out as quickly as possible. You can avoid making this mistake again by using a template or accounting software that enables you to create them easily, and setting a calendar reminder to send them out. You may even be able to automate them after each payment.
- Not keeping proper CIS records
Contractors are required to keep CIS records – such as payment statements, invoices, deduction details and verification checks – for at least three years.
If you have missing records, gather them as soon as possible to complete your files and store everything in a secure place – either digitally or in a locked cabinet. Ensure future records are automatically saved or backed up.
Seek assistance
If you find yourself struggling to stay on top of your CIS tasks and returns, an accountant can help. Choose a partner that understands the scheme and can offer practical support, ensuring you meet deadlines and avoid penalties.
Recent News Articles
Scam alert – the tax and Companies House frauds every business owner needs to know about
Your end-of-tax-year checklist for 2026/27 – key allowances to use before the 5 April deadline
