CIS for sole traders who pay subcontractors: monthly returns and nil returns

acrenvo.com/guides/cis-contractor-monthly-returns, last reviewed 18 October 2026

Owen is fictional. He is a self-employed builder who has worked on his own for years, and this year he has taken on more work than he can do alone. He has started paying a joiner and a labourer to help on his jobs, and both of them are self-employed. A friend told him that once he pays subcontractors, the Construction Industry Scheme (CIS) treats him as a contractor, with a return to send every month. He wants to know what that means for a sole trader like him, what happens in a month when nobody is paid, and what it costs to get it wrong. This guide follows GOV.UK’s guide for CIS contractors, in its own words wherever the detail matters.

Registering as a contractor

GOV.UK starts with who has to register. You must register as a contractor with the Construction Industry Scheme (CIS) if:

• you pay subcontractors to do construction work
• your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment

The first of those describes Owen. You may be a sole trader, in a partnership or own a limited company. GOV.UK’s page on who is covered gives his kind of business a name: “If your business is construction and you pay subcontractors for construction work, you’re a ‘mainstream’ contractor.” The timing matters too, because GOV.UK says: “You must register for CIS before you take on your first subcontractor.”

Registering may feel unfamiliar to a sole trader who has never had staff, because GOV.UK’s registration page sends contractors down the employer route. To register as a contractor, you need to follow the process for setting up as a new employer. When done, you’ll get a letter from HM Revenue and Customs (HMRC) with the information you need to start working as a Construction Industry Scheme (CIS) contractor, including your employer PAYE reference number.

Before taking anyone on, GOV.UK also asks contractors to think about whether the person is a subcontractor at all. “You must check if you should employ the person instead of subcontracting the work. You may get a penalty if they should be an employee instead.”

Taking deductions and paying them to HMRC

Once Owen is registered, the payments he makes change shape. GOV.UK says: “When you pay subcontractors, you’ll usually need to make deductions from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.” So the money Owen keeps back is tax his subcontractors are paying early, and his part is to pass it on to HMRC.

GOV.UK’s page on paying deductions is short. You must pay HM Revenue and Customs (HMRC) any deductions you’ve made. HMRC will set up a Construction Industry Scheme (CIS) payment scheme for you when you register as a contractor. On timing, it says: “Pay HMRC every month by the 22nd (or the 19th if you’re paying by post). You may be charged interest and penalties if you pay late.”

The monthly return

The return is how HMRC learns what Owen has paid. GOV.UK’s page on monthly returns says: “You must tell HM Revenue and Customs (HMRC) each month about payments you’ve made to subcontractors through your monthly return.” It then gives the ways to send one. You can file returns by using:

• the HMRC CIS online service
• some commercial CIS software

Each return also carries a promise about the people on it. “On your return, you must declare that the subcontractors listed are not employees.”

The deadline is set by the tax month, which does not follow the calendar month. GOV.UK puts it this way: “Send your monthly returns to HMRC by the 19th of every month following the last tax month.” Its example makes the point clearer: “If you’re making a return for the tax month of 6 May to 5 June, it must reach HMRC by 19 June.” The payment to HMRC is due a few days after the return, as GOV.UK’s page on paying deductions says, so Owen finds it easiest to treat the return and the payment as one job that he finishes in the same week each month.

A month when nobody is paid

Building work is not steady, and some months Owen will not pay anyone. GOV.UK is clear that the return does not simply stop: “You should file CIS returns every month. If you’ve made no payments, you’ll need to either:”

• file a return showing your payments were 0 (known as a ‘nil return’)
• tell HMRC that you’ve temporarily stopped using subcontractors (known as making an ‘inactivity request’)

The inactivity request is for a longer pause. GOV.UK’s page on telling HMRC about changes says: “You can make an inactivity request if you’ve temporarily stopped using subcontractors and do not expect to make any payments in the foreseeable future.” It goes on: “An inactivity request lasts for up to 6 months. You can renew it at the end of the 6 month period.”

The two choices meet in one place, which helps if Owen already uses HMRC’s online service. You can make an inactivity request when you file a nil return (a return showing your payments were 0), using the CIS online service. If you cannot use the CIS online service, you can tell HMRC by phone or post. When the work picks up again, GOV.UK says: “You must file a monthly return with payments if you start using subcontractors again. This will end your inactivity period.”

What changed for nil returns on 6 April 2026

From 6 April 2026, new regulations added the rule for months with no payments to the CIS regulations. The Income Tax (Construction Industry Scheme) (Amendment) Regulations 2026 were made on 12 March 2026 and came into force on 6 April 2026. Their explanatory note, which is not part of the regulations themselves, describes the change like this:

Regulation 2(2) inserts regulation 4(9A) and (9B) which require contractors, whose business includes construction operations, to make returns to His Majesty’s Revenue and Customs (“HMRC”) where the contractor has not made any payments to sub-contractors in a tax month (a nil return) unless the contractor notifies HMRC that they will make no payments for the tax month.

For Owen, that means a month without payments still needs a return unless he has told HMRC that he will make no payments for that month. It is the same pair of choices GOV.UK gives: a nil return, or an inactivity request.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

What a late return costs

GOV.UK says: “You’ll get a penalty if you miss the deadline for filing returns.” It then sets the penalties out by how late the return is.

If Owen thinks a penalty is wrong, GOV.UK’s page on monthly returns explains how to appeal, and says that you can appeal within 30 days of the date on the penalty notice. You cannot appeal over the phone.

How this sits beside MTD

GOV.UK’s contractor guide does not mention Making Tax Digital (MTD) for Income Tax, so it treats the monthly CIS return as a return of its own. If Owen is in MTD, his quarterly updates carry on alongside it. On the MTD side, GOV.UK’s guidance on quarterly updates says: “Your quarterly updates will include totals for each income and expense category you used to create your digital records.” HMRC’s quarterly update direction includes an expense category for a business like his, “Construction industry — payments to subcontractors”. The contractor guide names its own two ways to send the monthly return, HMRC’s CIS online service and commercial CIS software, so it is worth asking a software provider whether its product can send CIS returns before relying on it.

What Owen can take from this

Owen now has a routine. He registers before his first subcontractor starts, takes the deductions, sends a return every month by the date GOV.UK gives, pays HMRC what he has kept back, and in a quiet month sends a nil return or makes an inactivity request. His subcontractors see the other side of the same scheme, which is explained in the guide to MTD and CIS for subcontractors and the guide to monthly CIS statements. If GOV.UK changes its contractor guide, this guide will change to follow it.

Questions about CIS for contractors