In this section:
If you're registered as a contractor under the Construction Industry Scheme (CIS) you need to submit a monthly return to HM Revenue & Customs (HMRC) that lists all the payments you've made to your subcontractors or confirms that no payments to subcontractors were made.
You might sometimes make mistakes when you complete your monthly return - perhaps with the figures you're reporting. Occasionally you might make a mistake when you pay a subcontractor - for example you might pay them the wrong amount.
This guide explains how you can correct any errors and who you need to contact to do this. If you're an accountant or an agent who files CIS returns for your clients it'll help you understand how to deal with mistakes.
On this page:
Sometimes you might put wrong entries on your return such as:
In all of these cases you need to contact HMRC to correct your return. The quickest way to do this is to ring HMRC’s CIS Helpline.
If you make a mistake when you pay a subcontractor but your return accurately reflects what you've paid them, you don't have to correct your return. But you should contact HMRC so that they can amend the subcontractor's records. Read the guidance below for more detail on correcting different types of payment mistake.
If you've underpaid a subcontractor, you can pay them the extra amount that's due in the next month. Be sure to include this extra amount in the return for that next month.
For example, if the subcontractor's invoice was for £1,500 excluding VAT, but you read it as £150, you might pay them £120 after making a deduction of 20 per cent. Next month you could pay them another £1,080 after making a deduction of 20 per cent from the gross amount outstanding - £1,350. The subcontractor will then have received the full amount due to them - £1,500 gross and £1,200 net. You'll need to give them a summary of the payments you made in both months.
If you've overpaid a subcontractor and your return exactly reflects what you've actually paid the subcontractor then you don't have to correct it - instead you can get back the extra money in a later month if you still deal with them.
For example, if you owed the subcontractor £2,000 net, but you paid them £2,200, you'd need to get £200 back. If you owed them £2,000 net in the next month you could pay them £1,800 to get back your £200.
If you no longer deal with the subcontractor, you'll need to recover the overpayment from them another way. If they haven't cashed your cheque:
If the subcontractor's cashed your cheque and they won't repay the money don't correct your CIS return as it reflects what has been paid.
If the subcontractor is VAT registered then their invoices will include VAT. You must pay the VAT due to the subcontractor, but make any necessary deductions from the amount net of VAT. This is shown in the example below.
|
Calculation |
Pay to subcontractor |
|---|---|---|
Subcontractor's invoice |
£470 |
|
VAT element |
£70 |
£70 |
Gross amount net of VAT |
£400 |
|
20% deduction |
£80 |
|
Net amount payable |
£320 |
£320 |
Total payable to subcontractor |
|
£390 |
If you make the CIS deduction and the VAT in the wrong order you might end up paying the subcontractor £376 instead of £390. If you can correct this straight away and the CIS monthly return has already been submitted ask the subcontractor for the return of the deduction statement, issue a new one and let HMRC know so they can amend the monthly return.
You don't have to correct your monthly return if it shows exactly what you've paid out.
You should deduct the cost of materials from a subcontractor's invoice before working out the deduction. If you don't take off the materials cost you could deduct too much.
If your return shows exactly what you paid the subcontractor you don't have to correct it.
You need to make a deduction from some subcontractors at either 20 per cent or 30 per cent. Sometimes you shouldn't make any deduction at all. As long as your CIS return reflects exactly what you've paid, you don't have to correct your return. Don't adjust a subsequent payment to that subcontractor to make up for what you've over deducted.
If you accidentally pay one subcontractor instead of another, pay the right one and ask the wrong one to return your money. If the one you shouldn't have paid returns your cheque:
If the wrong subcontractor cashed your cheque before they repaid your money:
Type of error |
What happens next? |
The reason for doing this |
Comments |
|---|---|---|---|
You made an error on your return about a payment |
Contact HMRC to ask them to amend your return |
The original return doesn't reflect the actual payment |
|
You underpaid a subcontractor |
No amendment needed - but you'll need to make up the shortfall in a following month |
Both returns will reflect the actual payment - but the subcontractor will want all of their money |
|
You overpaid a subcontractor net - and you're continuing to use them |
No amendment needed if you sort things out in a following month |
Both returns will reflect the actual payment - but you'll probably want to square things up with your subcontractor |
|
You overpaid a subcontractor net, you're not using them any more - but they haven't cashed your cheque |
Contact HMRC to ask them to amend your return if the cheque is returned. |
The original return doesn't reflect the actual payment situation |
|
You overpaid a subcontractor net, you're not using them any more - and they've cashed your cheque |
Unless and until you recover the money HMRC cannot
correct the deduction as the return reflects exactly
what was paid to the subcontractor |
|
|
You forgot to take off the VAT before you worked out the deductions |
|
Your return reflects the amount you paid. |
|
You got the amount for materials costs wrong |
Contact HMRC to tell them about the over-deduction |
The subcontractor's records will need updating |
HMRC will repay the subcontractor |
You paid the wrong subcontractor - but they didn't cash your cheque |
Contact HMRC to ask them to amend your return |
The original return doesn't reflect the actual payment situation |
|
You paid the wrong subcontractor - and they cashed your cheque |
Only contact HMRC if and when the money is repaid. |
The original return reflects the right payment amount but to the wrong person |
|
A subcontractor you paid never cashed your cheque |
As long as you made a new payment, you can leave things as they are on the original return |
|
|
You made a deduction at the wrong rate |
Follow the rules for overpayments or underpayments - as appropriate - and contact HMRC to let them know |
The original return should reflect what you actually paid. |
HMRC will repay the subcontractor if appropriate |
Once you've submitted your monthly return you need to contact HMRC either by phone or by post to correct any errors. You can't make corrections to your monthly return online - even if you submitted the return online.
The quickest way to correct errors is to call HMRC’s CIS Helpline. Make a note of the date and time you called - and the changes you reported - in case there's any dispute later on.
You can also tell HMRC about corrections by writing to HMRC, Custom House, Carnbane Way, Carnbane Industrial Estate, Newry, BT35 6QG.
If HMRC think you made the errors deliberately or because you were negligent, they may give you a penalty for an incorrect return. This could lead to you losing your gross payment status if you're also a subcontractor.
Read about paying CIS subcontractors
Read more about contractors' obligations under the CIS
Read detailed guidance about errors on CIS returns
