Construction contractors carry the heaviest load under the Construction Industry Scheme: verifying subcontractors, deducting tax at the right rate, filing a return by the 19th of every month and, since 6 April 2026, filing nil returns again unless HMRC has been told in advance. Late returns attract penalties from £100, and HMRC now has stronger powers where payments are linked to fraud. Tax investigation insurance pays your accountant’s fees for defending CIS checks.

What must a CIS contractor do?

  • Verify new subcontractors with HMRC before paying them, and re verify anyone not included on a CIS return in the current or last 2 tax years.
  • Deduct 20% for registered subcontractors, 30% where they cannot be verified, and nothing for those with gross payment status.
  • File a monthly return by the 19th of every month following the end of the tax month.
  • Nil returns. Regulations in force from 6 April 2026 reinstated nil returns, unless you have told HMRC in advance that you will not pay subcontractors that month.
  • Register as an employer before you first pay subcontractors, even if you have no employees.

Our Construction Industry Scheme guide covers the basics.

What are the penalties for late CIS returns?

  • 1 day late: £100;
  • 2 months late: £200;
  • 6 months late: £300 or 5% of the CIS deductions on the return, whichever is higher;
  • 12 months late: a further £300 or 5%, whichever is higher;
  • later than that, penalties can reach £3,000 or 100% of the deductions.

What changed for fraud from April 2026?

Finance Act 2026 gave HMRC power, from 6 April 2026, to remove gross payment status immediately where a business knew or should have known a payment was connected to fraud, to bar reapplication for five years, and to charge a penalty of up to 30% of the tax lost, which can also be charged to company officers. HMRC’s factsheet CC/FS96, published in September 2026, explains these penalties.

What does a CIS compliance check look at?

  • whether subcontractors were verified and the right rate deducted;
  • whether every payment to a subcontractor was on a return;
  • whether workers treated as self employed should have been on payroll;
  • the VAT domestic reverse charge on invoices;
  • whether your own gross payment status conditions are still met.

Subcontractors face their own checks; see tax investigation insurance for CIS subcontractors.

What does tax investigation insurance pay for?

Solar Protect cover responds to Construction Industry Scheme checks, PAYE and National Insurance checks, employment status disputes, VAT checks and full and aspect enquiries into Income Tax and Corporation Tax returns.

Tax investigation insurance pays your accountant’s fees if HMRC opens a check after your cover starts. Solar Protect cover pays up to £100,000 with no excess. It never pays tax, interest or penalties. Read how our cover works or get a quote today.

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 7 October 2026. Sources: GOV.UK, What you must do as a CIS contractor; SI 2026/289; Finance Act 2026 section 220; HMRC factsheet CC/FS96. Cover is subject to the policy terms, conditions and exclusions. This guide is general information, not personalised tax advice.