Accurate monthly CIS submissions start with the records behind each subcontractor payment. Contractors need the correct tax period, verified subcontractor details and a clear calculation showing how each deduction was reached. Checking those records throughout the month leaves fewer questions to resolve when the return is due.
The following steps establish a practical routine for preparing, checking and submitting reliable figures.
Use payment dates to build the monthly return
Prepare your CIS schedule for the tax month running from the 6th to the following 5th. Base it on payments made during that period, rather than simply exporting invoices dated within a calendar month.
For example, an August invoice paid by bank transfer on 4 September belongs in the period ending 5 September. If paid on 6 September, it falls into the next tax month.
Keep invoice dates and payment dates in separate fields. Where an invoice is settled through part payments, track each payment individually so the full invoice value is not reported every time a payment is made.
Check employment status before adding a subcontractor
Before including a worker in CIS, assess whether the actual engagement is self-employment for tax purposes. Having a UTR or being registered for CIS does not settle that question.
Consider the working arrangements, including control over the work, responsibility for correcting defects and whether a genuine substitute can be provided. Assess the overall circumstances; one factor alone does not determine status.
Keep a written record of the decision and revisit it when working arrangements change. Resolve uncertainties before signing the monthly declaration that the people listed are not employees.
Maintain verified details and deduction rates
Use one approved subcontractor record containing the registered name, UTR, relevant business identifiers and CIS verification result. Match the details to the legal entity supplying the work; a sole trader’s details should not be reused for their new limited company.
Verify new subcontractors before payment. Reverify returning subcontractors if they have not appeared on your CIS returns in the current or previous two tax years.
Apply the deduction rate or payment status confirmed during verification: normally 20% for registered subcontractors, 30% where registration cannot be confirmed, or no deduction for approved gross payment status. Record verification references and act on official notices changing payment status. Do not change a rate solely because a subcontractor requests it.
Support material costs with evidence
Calculate deductions after excluding VAT charged and allowable costs directly incurred by the subcontractor. Ask for a clear breakdown of labour, materials and other charges, supported by receipts or supplier invoices where available.
Check the actual purchase cost of materials. Any markup is not part of that cost, and materials you bought yourself cannot also be treated as the subcontractor’s expenditure. Travel and subsistence payments remain within the amount subject to deduction.
When the subcontractor is VAT registered, exclude VAT from their material costs. If they are not VAT registered, include VAT they paid on those materials.
For a payment of £3,000 excluding VAT, with £800 of allowable materials and no other deductible costs, the amount subject to CIS is £2,200. At 20%, the deduction is £440. The return records £3,000 as the gross payment, £800 as materials and £440 as the deduction. Entering £2,200 as the gross payment would understate the return.
Reconcile every subcontractor before reviewing the total
Match the draft return to your payment schedule, supplier records and bank transactions. Include payments to subcontractors with gross payment status, even though no tax was deducted.
Check that each payment appears once and under the correct subcontractor. Investigate duplicate supplier accounts, unexplained differences and payments made outside the usual payment run. A balanced overall total can still conceal an amount allocated to the wrong person.
Remember that the bank transfer usually represents the amount after CIS deductions, with any VAT charged included. Reconcile it through those components instead of expecting it to equal the return’s gross payment figure.
If missing paperwork repeatedly delays this work, bookkeeping support can help keep documents and transaction records organised throughout the month.
Configure software around the checks you need
Use CIS-capable software to calculate deductions and prepare reports from approved records. Set up separate fields for gross payments, VAT, allowable materials and CIS withheld. Restrict changes to subcontractor identities and deduction rates to authorised staff.
Review warnings about missing identifiers, duplicated payments and unusual material proportions before accepting the output. Software cannot establish whether a materials claim is reasonable or whether the underlying employment status decision is correct.
Agree who will submit the return and through which system, particularly when an accountant is involved. This avoids competing versions being filed.
Leave time for review and confirm successful filing
Set an internal review date several working days before the filing deadline: the 19th following the tax month. Give the reviewer the draft return, reconciliation and unresolved queries together so they can check the evidence behind the figures.
For a small business, the owner or accountant can perform this review. Once approved, submit the return and retain the acknowledgement confirming acceptance. A saved draft or attempted transmission does not establish that filing succeeded.
Where deductions were made, issue subcontractor payment and deduction statements by the same 19th deadline. Generate them from the approved figures so they agree with the submitted return.
FAQs
What should I do if no subcontractors were paid?
File a nil return or submit an inactivity notification through the CIS reporting service. An inactivity request can cover up to six months. Resume reporting when payments restart; do not assume an empty payment schedule closes the scheme.
How should retention payments be treated?
Report a retention when it is paid. Apply the subcontractor’s payment status at that time and check whether fresh verification is required, particularly after a long gap.
Can I correct an incorrect CIS return?
Yes. Use the CIS online service to correct a reporting error in the affected return. Keep an explanation and supporting records, and distinguish reporting mistakes from errors in the payment itself.
How long must CIS records be kept?
Keep CIS records for at least three years after the end of the relevant tax year. Other accounting or tax requirements may mean the same documents need to be retained longer.