CIS accountants for contractors and subcontractors

What does a CIS accountant do for contractors and subcontractors?

We prepare the returns where CIS deductions are claimed back, and the payroll and VAT work that runs alongside them. HCA Accountants Ltd is a member of the Institute of Financial Accountants (IFA), based at Park House in Leeds.

• Sole traders and partners: your Self Assessment tax return, with your CIS deductions set against the bill.
• Limited companies: payroll and RTI reporting, including the Employer Payment Summary that offsets CIS deductions.
• VAT-registered firms: VAT returns that handle the reverse charge.
• Year end: annual accounts for sole traders and companies, and Corporation Tax returns for companies.

What must a contractor do under the Construction Industry Scheme?

You are a contractor if you pay subcontractors for construction work. A business outside construction is one too once it spends more than £3 million on construction in the 12 months after its first payment.

Register before your first subcontractor, through HMRC's process for a new employer. Check whether each person should be your employee instead, then verify them with HMRC before you first pay them, and again if they have not been on your CIS returns in the current or last 2 tax years.

Keep CIS records for at least 3 years after the tax year ends. Missing records, or the wrong employment status on a return, can each bring a penalty of up to £3,000.

Tax months run from the 6th to the 5th. Each month you must:

• deduct the rate HMRC gives you (20%, 30% or 0%) from the labour only, not from VAT, materials the subcontractor bought, plant hire, consumables or fuel other than for travel
• give each subcontractor a payment and deduction statement by the 19th
• file your monthly return so it reaches HMRC by the 19th
• pay HMRC by the 22nd (the 19th by post), together with any PAYE

Do you need to file a CIS nil return?

Yes, if your construction business has paid subcontractors before. Since 6 April 2026, under the Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026, you must file a nil return by the 19th for any tax month with no payments.

The exception is telling HMRC, at least 14 days before the tax month starts, that you will make none. An inactivity request lasts up to 6 months and can be renewed.

What are the penalties for a late CIS return?

Miss the 19th and HMRC charges £100, rising as the table shows. A return more than 12 months late can also bring up to £3,000 or 100% of the deductions on it, whichever is higher.

You can appeal within 30 days of the date on the penalty notice.

How do CIS deductions work for subcontractors?

If you are registered and the contractor can verify you, 20% is taken from your labour. If you are unregistered or cannot be verified, it is 30%. If HMRC has given you gross payment status (permission to be paid without deductions), nothing is taken.

To register online you need your tax reference number (Unique Taxpayer Reference, or UTR). Without one, register for Self Assessment as a new business and choose 'working as a subcontractor'. Keep every monthly statement, as HMRC may ask for them.

How do you claim CIS deductions back?

Sole traders and partners use the Self Assessment return: total pay before deductions as income, and the total taken as CIS deductions. HMRC repays any excess, or you pay the rest by 31 January after the tax year.

Limited companies use payroll. Send your payroll report (Full Payment Submission) with an Employer Payment Summary (EPS) showing the CIS deductions taken from you so far this tax year, and HMRC takes them off your PAYE bill. Unused amounts carry forward within the tax year, and any balance after 5 April can be reclaimed.

Never use the Corporation Tax return for this: HMRC can charge a penalty.

CIS tax refund: a worked example for 2026/27

Ryan (hypothetical) is a self-employed joiner registered for CIS. In 2026/27 contractors pay him £40,000 for labour and take 20%, which is £8,000. His van, tools, insurance and phone cost £8,000, so his profit is £32,000.

Income Tax: £32,000 less the £12,570 Personal Allowance leaves £19,430, and 20% of that is £3,886. Class 4 National Insurance: 6% of £19,430 is £1,165.80. He pays no Class 2: with profits of £7,105 or more it is treated as paid, which protects his National Insurance record.

His bill is £5,051.80 against £8,000 already paid, so HMRC owes him £2,948.20. He can file from 6 April 2027; the deadline is 31 January 2028. He makes no payments on account (advance payments towards next year's bill) for 2027/28: CIS deductions count as tax already paid, and his covered more than 80% of the bill.

Rates are for 2026/27 outside Scotland, and figures for later years may change at the Budget on 28 October 2026.

Who can get CIS gross payment status?

HMRC checks that your tax and National Insurance were paid on time (VAT too, since 6 April 2024), that you do construction work in the UK and that the business runs through a bank account.

HMRC reviews it every year. If it is withdrawn you wait a year to reapply, or 5 years after an immediate removal for fraud or serious non-compliance (from 6 April 2026, under Finance Act 2026).

Turnover for the last 12 months, ignoring VAT and materials, must be at least:

• £30,000 for a sole trader
• £30,000 per partner or director, or £100,000 for the whole partnership or company
• £30,000 for each controller of a company run by 5 people or fewer

How does the VAT reverse charge work for construction?

Since 1 March 2021, the customer, not the supplier, pays the VAT to HMRC on most construction services between VAT-registered businesses. This is the domestic reverse charge.

It applies when the customer is VAT registered, the payment is reported under CIS and the work is standard or reduced rated. It does not apply to householders, or to a customer that confirms in writing that it uses the work rather than selling it on (an end user) or is connected or linked to such a business (an intermediary supplier).

The supplier's invoice states the VAT without charging it, for example 'Customer to pay the VAT to HMRC', and the customer declares and reclaims it on the same VAT return. Reverse charge supplies, made or received, cannot go through the Cash Accounting Scheme, and a supplier due repayments can ask for monthly returns.

Common questions

Your next step

Work out a deduction with our CIS calculator, then call 0113 460 1786 or email ask@hca-accountants.com with your CIS role, how you trade and the tax year you need help with.

We’ll agree the scope of support with you before work begins.

Related pages

• CIS: what should contractors and subcontractors check?
• CIS deductions calculator
• Self Assessment tax returns
• Payroll processing
• VAT returns
• Tax calendar (CIS dates)
• Industries we work with
• Contact HCA