The CIS monthly return, explained for subcontractors

What the monthly return is

Each month, a CIS contractor has to tell HMRC about the payments they've made to subcontractors. That report is the monthly return. It can be filed through the HMRC CIS online service or some commercial CIS software. On it, the contractor must declare that the subcontractors listed are not employees. You, as a subcontractor, are on the list if you were paid in that period.

Who files it, and who doesn't

Only the contractor files. You don't send anything to HMRC about each payment as it happens. Your part comes at the end of the year, when you include your pay and your deductions in your Self Assessment tax return. If you are also a contractor yourself, because you pay other subcontractors, you must register and file as both.

Tax months and deadlines

CIS runs on tax months, which go from the 6th of one month to the 5th of the next. GOV.UK gives this example: for the tax month of 6 May to 5 June, the return must reach HMRC by 19 June. A contractor must send each return by the 19th of the month following the end of the tax month.

The contractor must also pay the deductions to HMRC every month by the 22nd, or the 19th if paying by post, in the same way as PAYE and National Insurance.

Where your statement fits in

If a contractor makes deductions, they must give you a payment and deduction statement within 14 days of the end of each tax month. For the 6 May to 5 June month, that means by 19 June, the same date as the return. The statement shows what they paid you and the deductions they took. Keep every one: HMRC might ask for evidence of your deductions when you claim them back. See CIS payment and deduction statements.

Worked example: one tax month, four weekly invoices

Sam is registered for CIS at 20%. In the tax month 6 May to 5 June, he invoices four weeks, each with £950.00 of labour and no materials.

The contractor reports Sam's payments in the return due by 19 June, and Sam's statement should show a gross amount of £3,800.00 and £760.00 deducted. If Sam's own invoices add up to something different, he should speak to the contractor, since GOV.UK says to do so if you think the figures are incorrect. Try the numbers in the CIS calculator.

What happens if the return is late

That's the contractor's penalty, not yours, but it explains why a good contractor is strict about their paperwork. GOV.UK lists £100 for a return one day late, £200 at two months, and £300 or 5% of the CIS deductions (whichever is higher) at six months and twelve months, with possible extra penalties after that. A contractor who gets the employment status wrong can also face a penalty of up to £3,000.

Things to check each month

• Does the statement arrive within 14 days of the end of the tax month?
• Is the gross amount the same as your invoices, before deductions?
• Is the rate 20%, not 30%? If not, see CIS verification.
• Are the deductions what the calculator says they should be?
• Have you filed the statement with your records for the year-end claim?

If you can't get statements, for example because your contractor has gone out of business, GOV.UK says you can write to HMRC with your name, address and UTR, the contractor's name and address, and the dates of the payments. This guide is general information, not tax advice.