If you’re a construction contractor operating under the Construction Industry Scheme (CIS), now is a good time to review your monthly returns.
HMRC has confirmed that it will write to CIS-registered contractors in October 2026 where it has identified errors in their monthly submissions.
The issues being flagged are relatively straightforward, but they can be easy to overlook when you’re dealing with multiple subcontractors, invoices and payments every month.
What errors is HMRC looking for?
1. Using the wrong deduction rate
Contractors must verify subcontractors with HMRC when required and use the deduction rate HMRC has confirmed.
Using an outdated rate or assuming that a previous rate still applies could lead to incorrect deductions.
2. Incorrectly recording material costs
Where subcontractors have paid for allowable materials, those costs must be recorded correctly and separately.
CIS deductions generally apply to the labour element rather than qualifying material costs. Errors in the breakdown can result in incorrect deductions.
3. Submitting figures that don’t match accounting records
Payment amounts, material costs and CIS deductions should be checked against invoices, payroll information and accounting records.
Even small discrepancies can create problems if they occur repeatedly across monthly submissions.
Don’t wait for HMRC to get in touch
Our advice is to check your processes now rather than wait for a letter.
Make sure subcontractors are being verified when necessary, the correct deduction rates are applied and material costs are properly recorded.
It’s also important to reconcile your monthly returns against your accounting records before submitting them.
If you identify an error, take steps to correct it promptly.
How Progress Accountants can help
Keeping CIS records accurate can be challenging, particularly for growing construction businesses managing several projects and subcontractors.
At Progress Accountants, we help contractors stay on top of their reporting obligations and avoid unnecessary compliance issues.
Not confident your CIS returns are being handled correctly?
Get in touch with our team. Reviewing your processes now is far easier than having to explain discrepancies to HMRC later.
