What is a monthly CIS return?

PHS Team

03 Jan, 2025

A Monthly CIS Return is an important document for contractors in the construction industry, serving to report payments made to subcontractors and any tax deductions taken. Under the Construction Industry Scheme (CIS), contractors are required to stop a percentage of payments for tax purposes, which is then reported to HM Revenue and Customs (HMRC) through this return. Filing this return accurately and on time ensures compliance with tax regulations and helps avoid costly penalties.

By submitting a Monthly CIS Return, contractors provide HMRC with a clear record of payments and deductions, enabling proper tax calculations for subcontractors. This process not only protects contractors from potential legal issues but also supports subcontractors in managing their tax responsibility effectively. In this blog, we will explain deeper into what a Monthly CIS Return is, who needs to file it, and how to ensure it is completed correctly.

What is a CIS Return?

A CIS Return, or Construction Industry Scheme Return, is a mandatory document that contractors in the construction industry must submit to HM Revenue and Customs (HMRC) every month. This return details the payments made to subcontractors during the reporting period, as well as any tax deductions that have been hidden from those payments.

Under the CIS, contractors are required to deduct a percentage of the payment they make to subcontractors for tax purposes. This deduction is then reported in the CIS Return, which helps ensure that subcontractors pay the correct amount of tax on their earnings. 

Filing a CIS Return accurately is important for compliance with tax regulations. Failure to submit it on time or provide incorrect information can result in penalties and additional scrutiny from HMRC. Overall, the CIS Return plays a key role in maintaining transparency within the construction industry and ensuring that tax responsibilities are met appropriately.

Importance of Filing a Monthly CIS Return

Following are the Importance of filing a monthly CIS Return:

1. Compliance with Tax Regulations: Filing a Monthly CIS Return ensures that contractors follow HM Revenue and Customs (HMRC) regulations, avoiding legal issues and penalties.
2. Accurate Tax Deductions: By reporting payments and deductions accurately, contractors help ensure that subcontractors receive the correct tax treatment, preventing overpayment or underpayment of taxes.
3. Avoiding Penalties: Timely submission of the return helps contractors avoid fines and interest charges associated with late or incorrect filings.
4. Clear Financial Records: The return provides a transparent record of all payments made to subcontractors, which is important for both accounting purposes and audits.
5. Supporting Subcontractors: By filing the return, contractors assist subcontractors in managing their tax responsibility, making it easier for them to file their tax returns accurately.
6. Building Trust: Consistent and accurate filings help trust between contractors and subcontractors, increasing professional relationships within the construction industry.

Who Needs to File a Monthly CIS Return?

Understanding who needs to file a Monthly CIS Return is important for compliance within the construction industry. Contractors are primarily responsible for filing these returns. A contractor is any business or individual that pays subcontractors for construction work. This includes companies, sole traders, and partnerships involved in construction activities.

Eligibility Criteria for Contractors

To be eligible to file a Monthly CIS Return, contractors must be registered with HM Revenue and Customs (HMRC) under the CIS. This registration is important as it allows contractors to deduct the correct amount of tax from payments made to subcontractors. Contractors must also ensure they have accurate records of all payments and deductions made during the month.

Responsibilities of Subcontractors

While subcontractors do not file the Monthly CIS Return themselves, they play a main role in the process. Subcontractors must provide their contractors with the necessary information, including their Unique Taxpayer Reference (UTR) and whether they are registered under CIS. This information helps contractors determine the correct tax deductions to apply. Additionally, subcontractors should keep track of their earnings and deductions to ensure accurate reporting when they file their own tax returns.

Step-by-Step Guide to Filling Out the Return

Submitting your Construction Industry Scheme (CIS) return accurately and on time is important to avoid penalties. Follow this step-by-step guide to complete your CIS return.

Gather Required Information:

Before starting, collect all necessary documents, including payment records for subcontractors, details of tax deductions, and your Unique Taxpayer Reference (UTR). Ensure you have accurate records of all payments made during the reporting period.

Access the Online Portal:

Log in to your HMRC online account. If you do not have an account, you will need to create one to file your return online. This portal is where you will submit your Monthly CIS Return.

Select the CIS Return Option:

Once logged in, navigate to the section for submitting a CIS return. Choose the appropriate month for which you are filing, typically covering payments made from the 6th of the previous month to the 5th of the current month.

Enter Contractor Details:

Fill in your details as the contractor, including your name, UTR, and business address. This information is important for HMRC to identify your business correctly.

Input Subcontractor Payments:

List all payments made to subcontractors during the month. Include their names, UTRs, and the amounts paid. Ensure that each entry is accurate to avoid future differences.

Record Deductions:

Calculate and enter the total amount deducted from subcontractor payments for tax purposes. This deduction is typically a percentage of the payment made and must be reported accurately.

Review Your Entries:

Before submitting, double-check all information for accuracy. Ensure that all figures match your records and that there are no missing entries.

Submit the Return:

Once you are confident that everything is correct, submit your Monthly CIS Return through the HMRC portal. You should receive a confirmation of submission,  keep this for your records.

CIS Return Deadlines

The Following Table shows you the deadline for CIS Return:

Understanding Deductions and Payments

1. Deductions from Subcontractor Payments: Under the Construction Industry Scheme (CIS), contractors are required to deduct a portion of payments made to subcontractors to cover their tax liabilities. Typically, this means withholding 20% for registered subcontractors and 30% for those who are not registered. These deductions are reported in the Monthly CIS Return submitted to HM Revenue and Customs (HMRC). This process helps ensure that subcontractors meet their tax obligations while allowing contractors to comply with CIS regulations.
2. Payment Process for Contractors: When making payments, contractors first calculate the net amount owed to subcontractors after applying the necessary deductions. After deducting the appropriate percentage, contractors pay the remaining balance directly to the subcontractor. Additionally, they must submit the hold amounts to HMRC. This system not only facilitates tax compliance for subcontractors but also ensures that contractors fulfil their responsibilities under the CIS framework.

Penalties for Late or Incorrect Returns

Failing to submit accurate and timely CIS returns can result in significant penalties. Here's what you need to know:

The monthly CIS Return is an important requirement for contractors in the construction industry. It ensures that payments to subcontractors are reported accurately and that the appropriate tax deductions are made.

Therefore, with the importance of this return and the ease of filing deadlines, contractors can avoid penalties and maintain compliance with HMRC regulations. Properly managing CIS returns not only protects your business but also supports subcontractors in fulfilling their tax responsibilities.

If you have any doubts about completing your Monthly CIS Return, contact us at 0208 8611685  and email info@phs-uk.co.uk. We are dedicated to supporting your business with a range of tailored services. Our expert team provides complete accounting solutions, ensuring accurate bookkeeping, tax preparation, and compliance with regulations. We simplify payroll management, allowing you to focus on growing your business.