Verification with HMRC, deduction at the rate they actually gave you, applied to the labour element and nothing else, statements out to every subcontractor, and the monthly return filed on time, alongside the PAYE payroll for the people who are not subcontractors at all.
The CIS calendar does not move. The tax month ends on the 5th, and statements and the return are due by the 19th. Miss it by a day and the penalty is automatic whether or not anything was owed. We take the cycle on: subcontractors verified before they are paid, deductions calculated on the right figure, statements issued and the CIS300 filed.
Every month we handle:
No deduction at all. The subcontractor has passed HMRC's business, turnover and compliance tests and accounts for their own tax.
The subcontractor is registered under the scheme and verified. Deduction applies to the labour element at the standard rate.
The subcontractor is unregistered or HMRC cannot match them. The higher deduction applies until that is resolved.
Not an outcome. Paying at the standard rate without verifying is a breach in itself, and the shortfall lands on the contractor.
Main contractors, developers and housebuilders paying subcontractors across multiple sites and trades, usually alongside a PAYE payroll for staff and site management.
Labour suppliers placing trades on site, where the same worker may be CIS on one placement and PAYE on another, and the status treatment has to be right in both.
Businesses with nothing to do with construction, such as retailers, landlords and property investors, whose spending on building work has pulled them into the scheme without them noticing.
Almost always at least one of these, and usually running for longer than anyone realised.
Materials and plant left in the calculation, so subcontractors have been over-deducted for months and are entitled to the difference back.
Subcontractors paid at the standard rate on the assumption they are registered, with no verification reference to produce if it is questioned.
Returns filed but subcontractors never given their deduction statements, leaving them unable to evidence what has been taken from them.
A quiet month with no subcontractor payments, no return filed, and a penalty arriving for a month in which nothing happened.
People working fixed hours under supervision with the firm's tools, treated as subcontractors because it is administratively easier. The riskiest one on this list.
A limited company subcontractor with CIS taken from it that was never reported on the EPS, leaving real money sitting with HMRC.
Whatever HMRC tells you when you verify the subcontractor, and not a rate you have assumed. Verification returns one of three answers: gross payment status with no deduction, the standard rate for a registered subcontractor, or the higher rate where the subcontractor is unregistered or cannot be matched. Applying the standard rate to somebody who has not been verified is one of the most common and most expensive CIS errors.
The labour element only. Before calculating, you strip out VAT, the actual cost of materials the subcontractor has paid for, plant hire they have paid for from a third party, fuel other than for travelling, and manufacturing or prefabrication costs. What is left is the amount the deduction applies to. Deducting from the gross invoice including materials over-deducts, and the subcontractor is entitled to it back.
The monthly return covers a tax month ending on the 5th and has to reach HMRC by the 19th of that month. Payment and deduction statements have to be with each subcontractor you paid in that month by the same date. A return one day late attracts a fixed penalty, and the penalties escalate the longer it stays outstanding, so we treat the 19th as immovable.
It can. If your business is outside construction but your spending on construction operations exceeds the statutory threshold over a rolling twelve-month period, you become a deemed contractor and the scheme applies to you as it would to a builder. Property investors, retailers and large landlords get caught by this regularly, usually after a programme of fit-outs, and usually without realising until HMRC raises it.
Yes, unless you have told HMRC you will be inactive. A nil return still has to be filed for any month in which you made no payments to subcontractors, and forgetting it produces exactly the same penalty as forgetting a real one. We file nil returns as a matter of course so a quiet month does not become an expensive one.
Through their own payroll. A limited company subcontractor offsets the CIS deductions suffered against its PAYE, National Insurance and CIS liabilities by reporting them on an Employer Payment Summary, with any remaining balance repayable after the end of the tax year. If that is your position as well as your subcontractors', we handle the EPS side of it too.
No, and conflating the two is where real liability comes from. CIS is a deduction scheme, not a determination of employment status. A subcontractor who works set hours under your supervision using your equipment may well be an employee in law regardless of being paid under CIS, and HMRC can pursue the PAYE and National Insurance that should have been operated. We flag the arrangements that look wrong rather than processing them quietly.
Tell us how many subcontractors you pay, whether you also run PAYE, and what the last twelve returns looked like. We will tell you what needs fixing before we take it on.