CIS penalties for contractors
What HMRC can charge a contractor under CIS, from the late return penalties to the April 2026 fraud rules, each from GOV.UK.
Late monthly returns
| How late | Penalty |
|---|---|
| 1 day | £100 |
| 2 months | £200 |
| 6 months | £300 or 5% of the CIS deductions on the return, whichever is higher |
| 12 months | £300 or 5% of the CIS deductions on the return, whichever is higher |
For returns later than this, there may be a further penalty of up to £3,000 or 100% of the CIS deductions on the return, whichever is higher. Source: What you must do as a CIS contractor: file your monthly returns.
The penalties are charged on each return, however many subcontractors are on it. Source: HMRC manual CISR65050: late return automatic penalties. Since 6 April 2026 a mainstream contractor who paid no subcontractors in a month must file a nil return or tell HMRC it is inactive, or a penalty will be due: see CIS nil returns.
You can appeal within 30 days of the date on the penalty notice, online or in writing. You cannot appeal over the phone. Source: What you must do as a CIS contractor: file your monthly returns.
Getting the details wrong
- Employment status. On your return you declare that the subcontractors listed are not employees. You could get a penalty of up to £3,000 for giving the wrong employment status. Source: What you must do as a CIS contractor: file your monthly returns.
- Records. You could be fined up to £3,000 if you cannot show your CIS records when HMRC asks. Keep them for at least 3 years after the end of the tax year they relate to. Source: What you must do as a CIS contractor: record keeping.
- Statements. Penalties of up to £3,000 can apply if you do not give payment and deduction statements to subcontractors you deduct from, or give incorrect ones negligently or deliberately. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340). See what the statement must show.
HMRC's guide says it does not automatically look for penalties over a mistake. It usually acts in the more serious cases, where it believes the error was caused by negligence or intent. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340).
Deductions you did not make
If you should have made a deduction and did not, you are still responsible for paying that amount to HMRC. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340). If you pay HMRC late, you may be charged interest and penalties. Source: What you must do as a CIS contractor: pay deductions to HMRC. If the materials on an invoice look excessive, HMRC may recover the under deduction from you: see CIS labour and materials.
If you also work as a subcontractor, HMRC may cancel your own gross payment status if you do not operate the scheme correctly. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340).
The April 2026 fraud rules
Since 6 April 2026, where HMRC decides a business knew or should have known that a transaction was connected with fraudulent evasion of tax, it can:
- cancel the business's gross payment status at once, with no reapplying for 5 years, not one
- make the business liable for the lost tax
- charge a penalty of 30% of the lost tax to the business, and to its directors and other persons connected to it
Source: Tackling Construction Industry Scheme fraud (policy paper, 26 November 2025). The policy paper says compliant businesses that do the due diligence needed should not be affected. Read CIS supply chain due diligence and gross payment status.
Questions people ask
What is the penalty for a late CIS return?
£100 at 1 day late and £200 at 2 months late. At 6 months and again at 12 months, £300 or 5% of the CIS deductions on the return, whichever is higher.
Can I appeal a CIS penalty?
Yes, within 30 days of the date on the penalty notice, online or in writing. You cannot appeal over the phone.
Can directors be charged for a company's CIS fraud?
Since 6 April 2026 a penalty of 30% of the lost tax can be charged to the business found liable, and to its directors and other persons connected to it, where HMRC decides it knew or should have known.
Read on GOV.UK on 28 October 2026. If GOV.UK changes, we change this page.
More guides
- How to check a subcontractor's CIS statusVerify with HMRC, check the company, keep a dated record.
- CIS checks for labour providersThe rules look at the money you are paid as well as the money you pay.
- CIS changes April 2026: the new fraud rulesWhat changed on 6 April 2026, and what "knew or should have known" means.
- How to verify a subcontractor with HMRCWhen you must verify, what you need, and the reference to keep.
Wherever you build: CIS checks across the UK.