Who must file a CIS monthly return
Every contractor registered under the Construction Industry Scheme is required to submit a CIS300 monthly return to HMRC. The obligation begins the moment you register as a contractor and pay your first subcontractor, and it continues every month until you formally notify HMRC that you are no longer making CIS payments.
A contractor for CIS purposes is not limited to traditional construction firms. Any business that spends £3 million or more per year on construction work is classed as a "deemed contractor" even if construction is not its primary trade. Property developers, large retailers, and facilities management businesses often fall into this category without realising it, because the threshold is measured on total construction expenditure, not on the business type. If your business crosses the £3 million mark, CIS registration and monthly returns apply to you in the same way they apply to a bricklaying firm.
For a broader explanation of how the CIS scheme works and who it covers, see our guide to what the Construction Industry Scheme is.
The tax month cycle and the 19th deadline
CIS does not follow calendar months. It operates on tax months, each of which runs from the 6th of one month to the 5th of the next. The tax month ending 5 May, for example, covers payments made between 6 April and 5 May.
Your CIS300 for each tax month must reach HMRC by the 19th of the following month. Using the same example, the return for the tax month ending 5 May is due by 19 May. Payment of any CIS deductions you have collected from subcontractors and owe to HMRC is due by:
- 22nd of the month if paying electronically (faster payment or BACS)
- 19th of the month if paying by cheque
The filing deadline and the payment deadline are therefore the same date only if you are paying by cheque. If you pay electronically, you have three extra calendar days to transfer the funds, but you cannot use those three days as extra filing time. The return must still be submitted by the 19th.
| Event | Deadline |
|---|---|
| CIS300 return filed with HMRC | 19th of the following tax month |
| CIS deductions paid to HMRC (electronic) | 22nd of the following tax month |
| CIS deductions paid to HMRC (cheque) | 19th of the following tax month |
Missing the filing deadline by even one day triggers an automatic £100 penalty. HMRC's late-filing penalties for CIS are largely automated, so do not assume a short delay will go unnoticed. Build a standing reminder into your workflow for the 17th or 18th of each month to leave a margin.
What goes on the CIS300
The return captures every payment you made to a subcontractor in the tax month. For each subcontractor the CIS300 records:
- The subcontractor's name and Unique Taxpayer Reference (UTR)
- Their CIS verification number (which you receive when you verify them)
- The gross amount paid (labour element only)
- The cost of any materials included in the payment
- The deduction made and at which rate
A critical point on the deduction base: CIS deductions apply to the labour element of the payment only. The cost of materials a subcontractor buys and supplies for the job is excluded from the calculation. A subcontractor invoicing £1,000 with £600 labour and £400 materials has the 20% (or 30%) deduction applied to the £600 labour only, producing a deduction of £120, not £200. Applying the deduction to the full invoice amount is a common error that overpays HMRC and creates a refund claim problem for the subcontractor. The labour-only base must be reflected accurately on every CIS300 you submit.
Verifying subcontractors before you pay
Before making any payment under CIS, you must verify the subcontractor's status with HMRC. Verification tells you whether to deduct at 0% (the subcontractor holds gross payment status), 20% (registered with HMRC), or 30% (unregistered). Using the wrong rate is your liability, not the subcontractor's.
You verify online through HMRC's CIS service or via compatible accounting software. HMRC returns a verification number, which is what you record on the CIS300. You do not need to re-verify the same subcontractor every month unless their details change or they drop out of CIS and re-register.
From April 2026, verification carries additional weight. Under Finance Act 2026, HMRC can revoke gross payment status immediately where a contractor "knew or should have known" about fraudulent activity in the supply chain. Critically, failing to carry out adequate due diligence is itself enough to meet the "should have known" standard, without any need for HMRC to prove intent. Re-verifying each subcontractor's CIS status before payment is one of the three core due-diligence steps that protect your position. The other two are a Companies House legitimacy check and bank account name verification. Our dedicated guide to CIS subcontractor verification covers the full process and the April 2026 changes in detail.
The April 2026 nil-return obligation
One of the most operationally significant CIS changes in recent years came into force on 6 April 2026: contractors must again file a CIS300 nil return for any tax month in which they made no payments to subcontractors.
This obligation existed when CIS was modernised in 2007 and was removed in 2015, which created a ten-year gap during which contractors with no activity in a given month could simply do nothing. HMRC reinstated the requirement from 6 April 2026. The stated reason is to close a compliance gap that was being exploited to camouflage active periods within apparent inactivity.
The practical implication is straightforward but easy to overlook. If you are registered as a contractor but had no subcontractor payments in, say, the tax month ending 5 August 2026, you must either:
- File a nil CIS300 return by 19 August 2026, or
- Pre-notify HMRC of your inactivity before the start of that tax month
Pre-notification is the more proactive route and is useful if you know well in advance that you will have no CIS activity for a period. You contact HMRC to confirm you will have nothing to report for a specified number of months, and HMRC marks the period as inactive so that no returns are expected. This is not a permanent exemption: if subcontractor payments resume, your monthly return obligation resumes with them from the first active month.
Many contractors registered after 2015, who have only ever operated under the no-nil-return regime, are unaware the obligation has come back. The penalty for missing a nil return is identical to the penalty for missing a return with payments. There is no lesser treatment for the fact that nothing was owed.
For a focused read on the nil-return rule and how to handle it in practice, see our companion guide on CIS nil returns.
The full penalty ladder for late CIS returns
Late-filing penalties for CIS300 returns escalate in four steps. Each step is measured from the original due date, not from the previous step.
| How late | Automatic penalty |
|---|---|
| 1 day late | £100 |
| 2 months late | £200 |
| 6 months late | £300 or 5% of the CIS deductions due, whichever is higher |
| 12 months late | £300 or 5% of the CIS deductions due, whichever is higher; up to £3,000 or 100% where information is withheld deliberately |
The penalties accumulate per return, not per year. If you miss three consecutive monthly returns, you face three separate £100 first-day penalties, three separate £200 two-month penalties, and so on. A contractor who stops filing for six months without pre-notifying HMRC can easily accumulate £1,800 in fixed penalties before the percentage-based charges kick in, before any consideration of the CIS deductions actually owed.
The 6-month and 12-month thresholds introduce a percentage element that can dwarf the fixed amounts in high-volume months. A contractor who took £50,000 in CIS deductions from subcontractors in a single busy tax month, and then filed the return 12 months late, would face a penalty of £50,000 (100% of £50,000), not the £300 floor. The percentages are applied to the CIS liability on the return, not to any separately outstanding tax balance.
HMRC does have a reasonable-excuse defence for late-filing penalties, but it is applied narrowly. System failures, genuine illness and bereavement have succeeded in limited cases. Forgetting the deadline, relying on a busy accountant, or not knowing the rules are established as not being a reasonable excuse.
Correcting an error on a submitted CIS300
If you discover you have included incorrect figures on a return already submitted, you can amend it online through HMRC's CIS service within 12 months of the original due date. Common corrections include applying the wrong deduction rate because a subcontractor's verification status changed, entering the wrong materials split, or including a payment twice. File the amended return as soon as the error comes to light. HMRC takes a worse view of errors discovered during an investigation than of proactively corrected ones.
The new public sector exemption (Regulation 24ZA)
From 6 April 2026, under Finance Act 2026, a new Regulation 24ZA removes CIS entirely from payments made to local authorities and public sector bodies. Contractors working on public sector contracts no longer apply a CIS deduction to those payments, and those payments are not included in the CIS300 monthly return.
The practical effect is that a contractor paid by a local authority for construction work does not need to verify the local authority as if it were a subcontractor, does not deduct CIS from the payment, and does not report it on the next CIS300. Payments to private sector clients remain fully within CIS.
This is a genuine administrative simplification for contractors working across mixed public and private contracts, but the exemption applies only to payments to qualifying public sector bodies, not to payments made by them. If you are a subcontractor on a public sector project being paid by a private main contractor, your payments from that contractor remain within CIS in the normal way.
Staying compliant as a contractor in 2026/27
The CIS300 return sits at the centre of the contractor's compliance obligations. Its disciplines, monthly verification, accurate labour-materials splits, the 19th filing deadline, and now mandatory nil returns, are non-negotiable. The April 2026 changes added two further obligations that were not in force for most contractors currently trading: the nil-return reinstatement and the enhanced due-diligence duty around verification.
Getting these right protects you in two ways. Administratively, it avoids penalties that escalate quickly and compound across months. Commercially, robust verification and the Companies House and bank-account checks it now needs to accompany protects your own gross payment status if you hold it, because HMRC's new "knew or should have known" standard means that procedural gaps can cost you GPS without any fraud on your part.
If you are checking a deduction before it goes on the return, our CIS deduction calculator applies the correct rate to the labour element of any invoice in seconds.
If you want a specialist to take CIS return filing, subcontractor verification, and year-end compliance off your hands, see what our CIS accounting services cover or get in touch to talk through your situation.