CIS Compliance
CIS Compliance in 2025 – Common Pitfalls and How to Avoid a HMRC Slap on the Wrist
If you work in construction and the letters CIS make you twitchy, you're not alone. The Construction Industry Scheme is one of those HMRC inventions that seems designed to catch you out — and in 2025, they're tightening the net even more.
So, if you want to avoid surprise penalties, nasty tax bills, or the dreaded brown envelope from HMRC, read on.
First, a Quick Refresher…
CIS (Construction Industry Scheme) applies when you’re a contractor paying subcontractors for construction work. Under the scheme, you’re supposed to deduct tax at source (usually 20% or 30%) before paying them — and hand it over to HMRC.
If you're a subcontractor, that means you're getting paid with tax already taken off, unless you've got gross payment status, which lets you keep the full amount.
Simple in theory. In practice? Not so much.
Pitfall #1: Forgetting to Verify Subbies
Before paying any subcontractor, you’re supposed to verify them with HMRC to check whether:
They're registered under CIS
They’re on the 20%, 30%, or 0% (gross payment) rate
Forget to do this, and you might end up:
Deducting the wrong amount of tax
Getting told off by HMRC
Owing backdated payments (ouch)
Quick fix: Set up a routine — verify subbies as soon as you bring them on board. Most good accounting software can do this for you automatically.
Pitfall #2: Wrong or Late Monthly Returns
Every month, CIS contractors must file a return showing:
Who you paid
How much
What tax you deducted
Miss the deadline (usually the 19th of each month), and guess what? HMRC sends a lovely £100 fine. Keep missing it? That builds up fast.
Quick fix: Put a recurring reminder in your calendar — or better yet, let your accountant file it for you.
Pitfall #3: Not Giving Subbies Their Payment & Deduction Statements
It’s your job as the contractor to give your subcontractors a statement showing what they were paid and what was deducted. No, a WhatsApp message with "Paid you £1,600 m8" doesn't count.
Why it matters: Subbies need those statements to do their own tax returns properly. If they get it wrong because of you, that can come back to bite.
Quick fix: Use software (like Xero or QuickBooks) or a decent accountant (hint hint) to automate the statements.
Pitfall #4: Misunderstanding Gross Payment Status
Just because someone says they’ve got gross payment status doesn’t mean they do. You still have to check with HMRC every time.
Mistake: Paying a subbie in full thinking they’ve got gross status, only to find they don’t. Now HMRC wants that 20% from you.
Quick fix: Always verify. Always. Even if it’s your cousin Dave and he swears blind.
Pitfall #5: Not Registering for CIS When You Should
You might think you're not a contractor because you don’t build houses — but if you’re spending £3 million or more a year on construction-related costs, even as a business in another industry (say property or retail), HMRC might class you as a "deemed contractor".
Quick fix: Speak to your accountant if you're doing regular building works or renovations — just to make sure you’re not being dragged into CIS without realising.
What Are the Penalties?
Here's a taster of what HMRC can hit you with:
£100 fine for each late monthly return (goes up the longer you leave it)
Interest and penalties for late payments
Fines for incorrect returns
Possible loss of gross payment status (massive cash flow pain for subbies)
Final Word: Don’t Let CIS Catch You Out
Look, CIS is annoying — but it’s not impossible. The key is:
Know the rules
Set up a proper system
Get help when you need it
If you're not 100% sure you're CIS compliant, or if the monthly admin is doing your head in, give us a bell. We'll get you sorted before HMRC does.
Need a hand with your CIS returns?
We help builders, sparkies, plumbers, and every trade in between keep HMRC happy and penalties at bay. Give us a shout today – no jargon, no judgement.
