CIS for contractors: registering, verifying and monthly returns

As a CIS contractor you register with HMRC before paying any subcontractor, verify each one, deduct 20% or 30% from the labour part of their payments, and pay that to HMRC every month. You file a monthly return by the 19th and, since 6 April 2026, you must file a nil return for months with no payments. This guide covers each step for 2026/27.

Who counts as a CIS contractor?

You are a contractor if you pay subcontractors for construction work. HMRC’s guide What you must do as a CIS contractor splits contractors into two types.

Deemed contractors include housing associations, local authorities and government departments. The 12 months run from your first construction payment, so monitor spend if you are likely to reach £3 million.

How do you register as a contractor?

You register through HMRC’s new employer process before you take on your first subcontractor. HMRC then sends a letter with your employer PAYE reference number.

1. Register as an employer with HMRC, saying you will be a CIS contractor. Our guide to setting up PAYE walks through it.
2. Wait for your employer PAYE reference letter.
3. Set up HMRC’s free CIS online service or CIS-capable payroll software.
4. Collect each subcontractor’s details before their first job.

If you get stuck, the HMRC CIS helpline handles contractor registration questions.

How do you verify a subcontractor?

Verification tells you whether a subcontractor is registered and which deduction rate to use. You must verify any new subcontractor before paying them.

You do not need to verify again if you have included the subcontractor on a CIS return in the current or last 2 tax years. You can verify through HMRC’s free online service, but you need commercial software to verify more than 50 subcontractors.

Before you verify, collect the subcontractor’s name, Unique Taxpayer Reference (UTR) and either their National Insurance number or company registration number. The details must match exactly what the subcontractor used to register. If HMRC cannot match them, it may tell you to deduct at 30%.

How do you work out CIS deductions?

You deduct CIS from the labour element of the payment only. Start with the gross invoice and take off VAT, materials, consumables, fuel (except for travel) and plant hire the subcontractor paid for. Then apply the rate.

Example. A registered subcontractor invoices £3,000 for labour and £800 for materials. You deduct 20% of £3,000, which is £600, and pay them £3,200. The £600 goes to HMRC with your monthly payment.

Most CIS work between VAT-registered businesses also falls under the VAT domestic reverse charge, so you account for the VAT yourself.

What are the monthly deadlines?

CIS runs on tax months, which end on the 5th. Each month you have three jobs.

For example, for the tax month 6 October to 5 November 2026, the return is due by 19 November and electronic payment by 22 November. Late payments can attract interest and penalties.

Do you still need to file a nil return?

Yes, from 6 April 2026. HMRC’s policy paper of 13 March 2026 brought back nil returns, which were dropped in 2015.

You must file a nil return for any month with no subcontractor payments, unless you told HMRC in advance. An inactivity request covers up to 6 months and can be renewed. The same change put payments to local authorities and certain public bodies outside CIS.

What are the penalties for late CIS returns?

Penalties start the day after the deadline and rise the longer a return is outstanding.

After 12 months HMRC can add up to £3,000 or 100% of the deductions, whichever is higher. You can appeal within 30 days of the penalty notice.

Since 6 April 2026, HMRC’s fraud measures also allow immediate removal of gross payment status, a 5-year ban and a 30% penalty where a business knew or should have known of supply chain fraud.

What records must a contractor keep?

Keep records of every payment and deduction, including gross amounts, deductions and copies of statements, for at least 3 years after the end of the tax year they relate to. HMRC can fine you up to £3,000 if you cannot produce them.

What to do now

1. Check you will file a return, or have an inactivity request, for every month of 2026/27.
2. Re-verify any subcontractor last used more than 2 tax years ago.
3. Review supply chain checks given the April 2026 fraud rules.
4. Diary the 19 November and 22 November 2026 deadlines.

Subcontractors can see their side in our guide to CIS for subcontractors.

Frequently asked questions

When must a contractor register for CIS?

You must register before you take on your first subcontractor. Non-construction businesses must register once they spend more than £3 million on construction in 12 months.

When is the monthly CIS return due?

By the 19th of each month, covering the tax month that ended on the 5th. Payment is due by the 22nd if you pay electronically.

Do I need to file a CIS return if I paid no subcontractors?

Yes, since 6 April 2026. You must file a nil return unless you told HMRC in advance that you would make no payments that month.

What rate of CIS do I deduct if a subcontractor is not registered?

You deduct 30% of the labour element. Registered subcontractors suffer 20% and those with gross payment status suffer nothing.

How long must contractors keep CIS records?

At least 3 years after the end of the tax year they relate to. HMRC can fine you up to £3,000 if you cannot show them.