Before you pay: verify and deduct
Verify each new subcontractor with HMRC before you pay them, and any you haven’t included on a CIS return in the current or last 2 tax years3. HMRC’s answer sets the rate2; read verifying a CIS subcontractor for the details you need:
| Subcontractor | Deduction |
|---|---|
| Registered | 20% |
| Not registered | 30% |
| Gross payment status | 0% |
The rate applies after taking off what the subcontractor paid for VAT, consumable stores, fuel (except for travel), plant hire and manufactured or prefabricated materials. Materials only come off if the subcontractor paid for them directly2. Deductions count as advance payments towards the subcontractor’s own tax and National Insurance2.
The monthly return
The return lists the payments to each subcontractor and what was deducted, with a declaration that none of them are employees1. It is due by the 19th of the month after the tax month1:
| Tax month | Return due |
|---|---|
| 6 October to 5 November 2026 | 19 November 2026 |
| 6 November to 5 December 2026 | 19 December 2026 |
| 6 December 2026 to 5 January 2027 | 19 January 2027 |
Give each subcontractor a payment and deduction statement within 14 days of the end of the tax month too2.
Months with no payments
A month with no payments still needs either a nil return showing no payments, or an inactivity request telling HMRC you’ve temporarily stopped using subcontractors1.
Check your company’s dates and set a reminder
Search the Companies House register. Your company page shows its filing dates, what to file next and a reminder you can set.
Late returns
| Return late by | Penalty |
|---|---|
| 1 day | £1001 |
| 2 months | £2001 |
| 6 months | £300 or 5% of the CIS deductions on the return, whichever is higher1 |
| 12 months | £300 or 5% of the CIS deductions on the return, whichever is higher1 |
Later still, there can be a further penalty of up to £3,000 or 100% of the deductions, whichever is higher1. Each month’s return is penalised separately, so a contractor who stops filing for a few months builds up penalties quickly.
When your company is the subcontractor
If contractors deduct CIS from your own company’s invoices, that tax is claimed back through the company’s payroll, not on this return: read reclaiming CIS deductions as a limited company. A VAT-registered contractor files its VAT returns separately.
Filing CIS returns
Fileyear’s CIS monthly return works out each subcontractor’s deduction at the rate HMRC gave when you verified them, on the payment less the materials they bought, and files the CIS300, or a nil return for a month when nobody was paid. Each subcontractor paid under deduction gets a payment and deduction statement to pass on within 14 days of the end of the tax month.