Managing the Construction Industry Scheme (CIS) is already a task in itself, but when you’ve got 20 or more subcontractors on your books, things can quickly spiral into a compliance and admin nightmare.
In this guide, we’ll break down how to manage CIS at scale: from verifying subcontractors correctly, to automating monthly returns, staying compliant with HMRC, and avoiding costly penalties.
🔍 What Is CIS (Construction Industry Scheme)?
The Construction Industry Scheme is an HMRC tax deduction scheme for construction work in the UK. Contractors must deduct tax at source from subcontractors and report it to HMRC monthly. Rates are:
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20% for verified subcontractors
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30% for unverified
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0% if the subcontractor has gross payment status
When you’re dealing with 20+ subcontractors, this process can become extremely manual, unless you have the right systems.
1. Verify All Subcontractors Before Their First Payment
Before you pay any subcontractor, you must verify them with HMRC to check:
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Whether they’re registered for CIS
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What tax deduction rate applies (0%, 20%, or 30%)
How to do it:
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Use HMRC’s CIS Online service, or
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Integrate with accounting software like Xero, Sage, or QuickBooks that allows bulk verification
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Tip: Keep a log of all verification reference numbers as HMRC may ask for them in an audit.
2. Automate Your Monthly CIS Returns
With 20+ subcontractors, manual CIS returns = errors and stress.
Options:
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Use accounting software with CIS features (e.g. Xero with a CIS add-on)
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Or, outsource your CIS returns to a construction-focused accountant
Your monthly return must include:
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Subcontractor details
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Payment and deduction amounts
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Materials (which are not subject to CIS deductions)
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Verification references
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UTR numbers
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Best Practice: Submit your return by the 19th of each month and give each subcontractor a CIS payment and deduction statement.
3. Track Materials vs Labour Carefully
CIS deductions only apply to labour, not materials provided by subcontractors. But HMRC has strict rules on what counts.
Common Mistake:
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Deducting CIS on the full invoice amount (including materials)
Solution:
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Ask subcontractors to itemise labour and materials separately on every invoice
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Flag invoices that don’t separate them before processing payments
4. Keep Digital Records – HMRC Can Review Up to 6 Years
HMRC expects you to keep detailed records of:
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CIS verifications
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Invoices and deductions
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Monthly return submissions
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Subcontractor statements
Make sure these are digitally stored and backed up, especially if you grow past 50+ subcontractors.
5. Avoid These Common CIS Pitfalls
Even established construction companies slip up on:
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Forgetting to verify a new subcontractor = 30% deduction
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Late monthly returns = automatic £100 penalty, rising monthly
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Incorrect deductions = potential HMRC fines + subcontractor disputes
6. Tools to Simplify CIS for Larger Contractor Businesses
Here are tools we recommend for managing CIS at scale:
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Xero + CIS module – for digital returns and tracking
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BrightPay – good for CIS + payroll
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SubbieHub or Connect – for subcontractor onboarding and verification
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Outsourced accounting firm – for expert review + return submission
Need Help Managing CIS for 20+ Subbies?
We work with construction businesses across the UK to take the stress out of CIS compliance. Whether you’re struggling with software, late returns, or just want it off your plate entirely, we can help. Book a call here to get started or visit our website.
