A quiet month on site can feel like one less thing to worry about. No subcontractors paid, no CIS deductions made, so nothing to report, right? Unfortunately, that assumption can lead to an HMRC penalty.
From 6 April 2026, mainstream contractors must submit a CIS nil return when they make no reportable subcontractor payments. The other option is to notify HMRC that the business will be temporarily inactive. HMRC has confirmed this requirement in its current Construction Industry Scheme guidance.
For construction businesses, the practical message is simple. Every CIS month needs attention, even when nothing happened. A good monthly process helps prevent missed returns, incorrect deductions and avoidable penalties
Key Takeaways
- No subcontractor payments do not always mean no filing.
- Mainstream contractors must file nil or register inactivity where appropriate.
- CIS returns are normally due by the 19th following each CIS tax month.
- Late nil returns can attract the same fixed penalties as other late CIS returns.
What Is a CIS Nil Return?
A CIS nil return tells HMRC that you made no reportable payments to subcontractors during that CIS tax month.
A normal CIS monthly return lists the subcontractors you paid and any deductions made. A nil return confirms that there were no payments to report.
That may sound like a small administrative task, but it serves an important purpose. HMRC cannot otherwise know whether your business was genuinely inactive or simply failed to submit its return.
For example:
6 April to 5 May is one CIS reporting period. The return for that period must normally reach HMRC by 19 May. This monthly cycle continues throughout the year.
HMRC currently allows contractors to file through its CIS online service or recognised commercial software.
Do Subcontractors File CIS Nil Returns?
This is where the terminology often causes confusion. If you only work as a subcontractor, you do not normally submit monthly CIS contractor returns. Your contractor reports payments made to you and applies the appropriate CIS deduction where required.
However, many construction businesses operate as both. Imagine you work as a self-employed electrician for a larger contractor. You are a subcontractor in that relationship. You then hire another electrician to help complete one of your contracts.
For the payments you make to that electrician, you may now have contractor responsibilities under CIS.
That can include:
•Registering as a CIS contractor
• Verifying subcontractors
• Making the correct CIS deductions
• Providing deduction statements
• Filing monthly CIS returns.
So, a subcontractor can still become responsible for a CIS nil return if they also operate as a contractor.
When Is a CIS Nil Return Required?
A nil return becomes relevant when your CIS contractor scheme remains active, but you have paid no subcontractors during the reporting month.
HMRC’s guidance states that contractors should continue filing monthly returns even when no payments have been made. Alternatively, they can notify HMRC that subcontractor use has temporarily stopped.
Example
A building company regularly uses three subcontractors. During June, all work is completed by employees. The business makes no payments to CIS subcontractors between 6 June and 5 July.
The contractor may need to submit a nil return for that period. Simply having nothing to pay HMRC does not remove the reporting obligation.
Nil Payments Are Not Nil Deductions
This distinction is particularly important. A nil return means no payments were made to subcontractors. It does not mean no CIS tax was deducted.
For example, a subcontractor with gross payment status may receive £5,000 without any CIS deduction. The contractor still made a payment to a subcontractor. That payment must therefore appear on the CIS return. You cannot file a nil return simply because the CIS deduction was £0.
HMRC requires monthly returns to include relevant subcontractor payments regardless of whether subcontractors were paid gross or after deductions. This is an easy mistake to make when reviewing bank transactions.
What Is the CIS Nil Return Deadline?
The CIS reporting calendar catches many businesses because it does not follow ordinary calendar months. A CIS tax month runs from the 6th of one month to the 5th of the next. HMRC normally requires the return by the following 19th.
For example:
|
Activity |
Date |
|
CIS period begins |
6 May |
|
CIS period ends |
5 June |
|
Return filing deadline |
19 June |
|
Electronic payment deadline, if deductions are due |
22 June |
So, if you made no subcontractor payments between 6 May and 5 June, the month still needs reviewing. For a mainstream contractor, that could mean submitting a nil return by 19 June.
Filing and payment are different
Do not confuse the return deadline with the CIS payment deadline. Monthly returns are normally due by the 19th. Electronic payments of CIS deductions are generally due by the 22nd. A genuine nil return has no CIS deductions to pay, but the filing requirement can still exist.
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How Do You File a CIS Nil Return?
Contractors can submit CIS returns through HMRC’s CIS online service or compatible commercial software. If there were genuinely no subcontractor payments, the return should show that no payments were made.
HMRC guidance also allows contractors to make a nil declaration where appropriate. Before submitting, check the bank account and bookkeeping records carefully.
Ask:
• Were any subcontractors paid during the period?
• Were any payments made outside the main business account?
• Did a director personally pay a subcontractor?
• Did any subcontractor receive gross payment?
• Does the payment date fall inside the correct CIS tax month?
Do not assume the return is nil because the usual subcontractors were not used. Review the actual payments made.
What If You Stop Using Subcontractors?
Businesses can go through periods where they temporarily stop using subcontractors. Submitting repeated nil returns may then become unnecessary.
HMRC allows contractors to make an inactivity request where they do not expect to make subcontractor payments for up to six months. This can reduce unnecessary monthly administration. However, the responsibility does not disappear permanently.
If subcontractor payments start again during the inactivity period, the contractor should notify HMRC and ensure the required returns are submitted. An inactivity request should therefore only be used when no CIS payments are genuinely expected.
What Are the Penalties?
Ignoring a CIS return because there was “nothing to report” can become expensive. HMRC’s current late-filing penalty structure includes:
|
How late? |
Potential penalty |
|
1 day late |
£100 |
|
2 months late |
£200 |
|
6 months late |
£300 or 5% of CIS deductions, whichever is higher |
|
12 months late |
At least £300, with higher penalties possible |
More serious cases can attract additional penalties. HMRC states these may reach £3,000 or 100% of CIS deductions in certain circumstances.
For a genuine nil period, there may be no deductions on which to calculate the percentage. However, the fixed minimum penalties can still apply. That makes a forgotten nil return surprisingly expensive.
(Source: Construction Industry Scheme (CIS) contractor – Penalties)
Common CIS Nil Return Mistakes
CIS problems often come from ordinary admin failures rather than complicated tax rules. Here are some we regularly see with construction businesses.
Assuming no work means no return
A quiet site does not automatically suspend your CIS obligations.
If the business remains a mainstream contractor, check whether a nil return or inactivity notification is required.
Doing bookkeeping quarterly
Quarterly bookkeeping may work for some management tasks. It does not match the monthly CIS reporting cycle. By the time subcontractor payments are identified, the 19th may already have passed.
Monthly bookkeeping support gives contractors a much clearer view of reportable payments.
Forgetting subcontractor verification
Contractors need to check whether a subcontractor must be verified before payment. HMRC uses verification to confirm the correct deduction treatment.
Depending on the subcontractor’s status, payments may be:
• Made gross
• Subject to the standard CIS deduction
• Subject to the higher deduction rate
Guessing the deduction rate can create problems for both parties.
Getting labour and materials wrong
CIS does not mean simply deducting tax from the total invoice. Materials and VAT require correct treatment when calculating the amount subject to CIS deductions.
Keep clear invoice records showing each element separately.
Treating employees as subcontractors
CIS cannot be used to avoid PAYE. The actual working arrangement determines whether someone is employed or self-employed.
Incorrect classification can create PAYE, National Insurance and penalty exposure. Businesses managing employees alongside subcontractors may benefit from professional payroll support.
Losing track of inactivity
An inactivity period does not last forever. HMRC can mark the scheme inactive for up to six months. Once that period finishes, the reporting position needs reviewing again.
What If You Missed a CIS Nil Return?
Deal with the outstanding return as soon as you identify the problem. Do not wait for another HMRC letter. First, establish which monthly returns are missing. Then check whether each period should show payments or genuinely be nil.
If HMRC has already issued a penalty, you may have appeal rights. HMRC states that contractors can normally appeal a CIS late-filing penalty within 30 days of the penalty notice date. A successful appeal usually requires valid grounds. Simply forgetting the deadline will not necessarily remove the penalty.
If several months are outstanding, review the full CIS account before filing. This helps prevent incorrect nil returns being submitted simply to clear the backlog.
Keep CIS Records Up to Date
Good bookkeeping makes monthly CIS reporting much easier.
Your records should clearly identify:
• subcontractor names
• payment dates
• labour amounts
• materials where relevant
• CIS verification details
• deduction rates
• deductions made
• gross-status subcontractors
Bank reconciliations are particularly useful. They can highlight payments that might otherwise be missed when preparing a nil return. Construction businesses should also keep CIS records separate from ordinary supplier payments wherever possible.
A supplier selling materials is not automatically a subcontractor. Equally, paying someone for construction operations may bring CIS requirements into play.
The Bottom Line
A CIS nil return may look like a small administrative task, but ignoring it can lead to avoidable penalties.
If you only operate as a subcontractor, the monthly CIS contractor return will not normally be your responsibility. However, once you start paying your own subcontractors, your obligations can change.
Check each CIS tax month carefully. If no payments were made, submit the appropriate nil return or consider an inactivity request. Most importantly, do not confuse no deductions with no subcontractor payments.
If you are unsure whether your business needs to file a CIS nil return, we can review your CIS position and help you stay compliant with HMRC.
