What happens if you don't pay CIS?

The Construction Industry Scheme (CIS) comes with one of the most draconian penalty regimes around. To quote the HMRC website “If any of your CIS returns are one day late, we’ll charge an initial fixed penalty of £100”. The next month, that penalty rises to £200 and there is a further £300 penalty after 6 months or 5% of any liability that should have been shown on the return.

If after 12 months the return still hasn’t been made, there are further fines and in the worst case the fine can be up to the full amount that should have been deducted.

In the meantime, next month another return is due. If this one is a day late there is a £100 fine and then there are further fines if it is still not forthcoming. Then so on with the next month!

This is harsh.

If a contractor doesn’t deduct CIS, after 12 months they become liable for up to the full amount that should have been deducted.

That’s even harsher.

Severe illness might be an acceptable excuse, someone failing to file on your behalf or not having the cash to pay aren’t acceptable excuses.

And remember that a return is due every month, even if it’s null. So, as mentioned above, coming down the road after the first monthly return and its fines is the next monthly return, then the next and so on.

One person we saw giving advice about CIS on social media said that they charged much more for materials and virtually nothing for labour so it fell outside CIS. This misses the point that any profit on materials is also subject to CIS. If HMRC catches up with this person, they are likely to disappear under a sea of fines.

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Additional useful information

What is the Construction Industry Scheme (CIS)?

Construction Industry Scheme (CIS) FAQs