Registering for Construction Industry Scheme

When you register for the scheme, it will come with registering for a PAYE (pay as you earn) scheme with HM Revenue & Customs.

You must submit a return even if you do not pay anyone working for you for the month known as a nil return.

If you are late in submitting this there is a £100 late filing penalty per month.

We have a case where new prospects came to us, and they did not submit return as they thought they did not have to as they were nil returns.

HM Revenue and Customs did not remind them, and they sent 14 months of late filing penalties £1,400.00) in one go which they now must discuss this with HM Revenue & Customs and appeal.

Below are some Tips if you use the Construction Industry Scheme

✅ 1. Get Your CIS Registration Correct from Day One

Register as the right type of CIS participant

• Register as a contractor if you pay subcontractors for construction work or your non‑construction business spent £3m+ on construction in 12 months. [gov.uk]
• Register as a subcontractor if you carry out construction work for a contractor. You’ll otherwise suffer a higher 30% deduction. [gov.uk]
• If you do both, you must register in both capacities. [gov.uk]

Know what counts as construction work

CIS covers most UK construction work including building, demolition, repairs, site prep, and civil engineering.
Some roles like architecture, material delivery, and scaffolding hire (no labour) are exempt. [gov.uk] [gov.uk]

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✅ 2. Verify Every Subcontractor with HMRC Before Paying Them

This avoids incorrect deduction rates.

When verifying, HMRC will return:

• 0% (Gross Payment Status)
• 20% (standard rate)
• 30% (unregistered)

Tip: Always record verification numbers. They protect you during HMRC checks.

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✅ 3. Keep Your Monthly CIS Returns Spot‑On

Contractors must:

• File a monthly CIS return, even if no payments were made (“nil return”).
• Provide subcontractors with a monthly payment & deduction statement showing materials, labour, and CIS deductions.

Best practices:

• File early to avoid penalties.
• Use software that integrates CIS verification + reporting.

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✅ 4. Manage Gross Payment Status (GPS) Carefully

GPS gives subcontractors full payment with NO deductions, improving cashflow.
But you must maintain:

• Timely tax returns,
• Accurate payments,
• And clean compliance history.

If you slip behind on returns or payments, HMRC can withdraw GPS.

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✅ 5. Maintain Clear, Accurate Records

You MUST keep detailed records of:

• Subcontractor verifications
• Invoices and deductions
• Materials vs labour (CIS applies to labour only)
• CIS monthly statements
• Construction spend monitoring (for non‑construction contractors)
  [gov.uk]

HMRC expects clean, accessible audit trails under CIS.

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✅ 6. Understand What Is Not Covered under CIS

This helps avoid wrong filings:

• Architecture & surveying
• Carpet fitting
• Material delivery
• Site services like catering
  [gov.uk]

Misclassifying work can trigger investigations.

✅ 7. Use HMRC’s Updated Guidance and Online Tools

HMRC regularly updates CIS guidance — the latest update to CIS340 (Dec 2025).
Use the online service to: [gov.uk]

• Verify subcontractors
• File monthly returns
• Manage payments

The GOV.UK detailed CIS collection (2024–25 updates) consolidates forms, rules, webinars, and manuals. [gov.uk]

✅ 8. Avoid the Most Common CIS Penalties

Penalty traps include:

• Late monthly returns
• Paying subcontractors before verification
• Incorrect deduction rates
• Not keeping records for 3+ years

Quick tip: Whether you had activity or not, ALWAYS submit the monthly CIS return.

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✅ 9. For Businesses Not Based in the UK

If you carry out construction work within the UK, CIS applies even if your company is overseas. Registration is still required. [gov.uk]

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🎯 10. Build a Consistent Admin Routine

A simple monthly workflow:

1. Verify new subcontractors
2. Check invoices for materials vs labour
3. Apply correct deduction rate
4. Produce CIS payment statements
5. Submit the CIS return
6. Pay HMRC
7. Store all documentation properly

This reduces risk and keeps your tax affairs clean.

If you need help with the Construction Industry Scheme, please reach out to us:

gary@cubicaccountants.co.uk

Telephone: 07795 425032