You need your contractor registration, a verification for each subcontractor, the month's payments, materials and deductions, and a login for HMRC's online service or recognised CIS software, by the 19th. Up to about ten subcontractors, an AI-built sheet plus HMRC's free service is enough. Beyond that, use software or an accountant; above fifty, verification needs commercial software.
This is for UK contractors under the Construction Industry Scheme (CIS). A sheet only prepares the numbers: nothing on the gov.uk pages I read lets you upload a spreadsheet, so you type the figures into HMRC's service or use software. Since 6 April 2026 a month with no subcontractor payments also needs a nil return, or advance notice that none are expected.
What the monthly cycle asks of you
A CIS tax month runs from the 6th to the 5th, so the cycle repeats on dates that do not match the calendar month. The tax month 6 June to 5 July runs through this tutorial as the example. These steps come from the gov.uk contractor guide and the CIS 340 guide, read in October 2026.
| When | What you do | Source detail |
|---|---|---|
| Before your first subcontractor | Register by following the process for setting up as a new employer | HMRC sends a letter with your employer PAYE reference |
| Before paying anyone new | Verify the subcontractor with HMRC | Details must exactly match what they used to register; HMRC replies with the rate or says to pay gross |
| 6 June to 5 July | Pay subcontractors, deducting where required, and record gross amounts, materials and deductions | Keep records for at least 3 years after the end of the tax year |
| By 19 July | File the monthly return, and give each subcontractor a payment and deduction statement | Return within 14 days of the tax month end; statement within 14 days too |
| By 22 July (19 July by post) | Pay the month's deductions to HMRC | Paid the same way as PAYE and National Insurance |
The deduction rates are 20% for registered subcontractors, 30% for those not registered, and 0% where HMRC says the subcontractor has gross payment status. The deduction is not taken from the whole invoice. You start with the gross invoice excluding VAT and subtract what the subcontractor paid for: consumable stores, fuel (other than for travelling), plant hire, manufacturing or prefabricating materials, and materials they bought directly. The guide says to ask for evidence such as receipts and, if none exists, to estimate the materials cost. The rate then applies to what is left.
Three more rules shape any sheet. You must re-verify previously used subcontractors who were not on a CIS return in the current or last two tax years. The return carries declarations that employment status was considered and that every subcontractor who needs verifying has been. And for deductions at the higher rate, the verification reference goes on the return beside that subcontractor's entry.
What changed in April 2026 and what a late return costs
The change that matters most to a small contractor is nil returns. A government page dated 13 March 2026 says contractors who have not paid any subcontractors in a month must file a nil return, unless they notified HMRC in advance that they would make no payments that month. The CIS 340 guide, last updated 27 August 2026, says the obligation to file a nil return is reinstated for mainstream contractors from 6 April 2026. An inactivity notice can run for up to six months, and the next contract payment lifts it. From the same date, payments to subcontractors that are local authorities or public bodies fall outside CIS altogether: you do not verify them, deduct from them or put them on the return. The March page says this puts an existing concession into law.
If you built a reminder or an AI prompt before April, it may still treat a quiet month as optional. Check that first.
On penalties, I am reading the figures from HMRC's page on filing monthly returns and the CIS 340 guide as they currently read, not from memory. A late return attracts a fixed penalty of 100 pounds from the day after the deadline, a second fixed penalty of 200 pounds at two months, and tax-geared penalties at six months and again at twelve (each the greater of 300 pounds or 5% of the deductions on the return), with a further penalty of up to 3,000 pounds or 100% of the deductions for returns later still. The page also warns of a penalty of up to 3,000 pounds for the wrong employment status, and the record-keeping page adds a fine of up to 3,000 pounds if you cannot show your CIS records when HMRC asks. Check both pages for the current figures before you rely on these.
A return can also need correcting after you file it. Corrections are made online, through the same service you filed with; the CIS 340 guide says the CIS helpline cannot amend a return for you. With commercial software, the CIS 340 guide says amendments depend on whether the supplier offers the facility, so ask before you buy, and HMRC's own service cannot amend a return that was sent from third-party software. Whatever the route, send the subcontractor a corrected statement when a figure changes.
Six ways to prepare and file it, compared
Costs below are as printed on the vendors' pages in pounds, excluding VAT, at the standard price rather than the introductory offers both accounting packages were running. Sage's CIS page would not load, so it is not in the table; ask before you buy.
| Route | Cost as printed | Who files | Best when | Watch for |
|---|---|---|---|---|
| HMRC's CIS online service alone | Free | You, typing each line | A few subcontractors and simple invoices | You build the statements yourself; more than 50 verifications needs commercial software |
| AI-built sheet plus HMRC's service | Sheet is free; a paid AI plan is about $20 a month at its dollar list price, and free tiers exist | You | Up to about ten subcontractors, on a steady routine | The sheet's formulas and your re-typing |
| Xero | Ignite 18 a month, Grow 39; contractor CIS returns are an optional add-on at 5 a month on every plan | Xero sends the return to HMRC | You want bookkeeping and CIS in one place | Ignite allows 10 bills a month; the page does not say whether subcontractor bills count |
| QuickBooks | Simple Start 16 a month; every plan lists 'Calculate and submit CIS' | QuickBooks files to HMRC, at no extra cost according to its CIS page | You already keep your books in QuickBooks | Whether your plan covers contractor returns as well as CIS deducted from you, whether verification is included, and each plan's limits |
| FreeAgent | Price not retrieved | You: its help article says filing CIS300 returns from FreeAgent is not currently possible | You already use it and are happy to file elsewhere | Entering the figures twice; mark the return as filed afterwards |
| Accountant or bookkeeper | Set by quote | They file, if you authorise them | Many subcontractors, mixed rates, messy materials, or no time on the 19th | What the fee covers: verification, statements, nil returns, payment reminders |
Three of those lines need unpacking. Xero's pricing page lists 'Submit contractor CIS returns' as an optional 5-a-month add-on on every plan from Ignite up, while the subcontractor side (CIS deducted from your own income) is built into all plans. Ask whether subcontractor verification and bulk statement emails come with the add-on before you rely on them. Ignite lets you enter 10 bills and 20 invoices a month. If you pay twelve subcontractors a month and their bills count against that limit, you need Grow at 39 a month. At standard prices plus the 5 for CIS, a year costs 276 on Ignite and 528 on Grow. Xero was also offering new customers 90% off for the first six months, which would bring year one to about 179 and 317, but offers change, so budget on the standard figures.
QuickBooks' CIS page says it files CIS returns directly to HMRC at no extra cost within the subscription, and its pricing page puts 'Calculate and submit CIS' on every plan, so the questions there are the same as for Xero: what each plan limits and whether verification is included. FreeAgent, by contrast, builds the return figures and the statements from the CIS bills you record, and then leaves the filing to you.
Before you pay for any package, ask the vendor six things in writing.
- Does it send the return to HMRC itself, or only prepare the figures?
- Does it verify subcontractors, and does it show the rate HMRC returns?
- Does it handle nil returns and inactivity notices?
- Does it produce the payment and deduction statements, and can you email them in bulk?
- Can you amend a return after filing, and does it handle the verification reference needed for higher-rate lines?
- What limits apply to bills, invoices or subcontractors per month on the plan you are pricing?
Whichever route you pick, file by one only. The CIS 340 guide warns that using HMRC's online service and commercial software at the same time may cause returns to be overwritten. If you already run Xero or QuickBooks for bookkeeping, which plan includes AI is a useful companion read, and an accountant's role is set against AI bookkeeping in AI bookkeeping software against a human bookkeeper.
One tax month, four subcontractors, one return
A small builder's whole month fits in one table, using invented numbers. The tax month is 6 June to 5 July. All amounts are in pounds, with the symbol left out of the table. The invoices are shown excluding VAT, and the deduction is taken on what remains after the subcontractor's own materials.
| Subcontractor | Rate | Gross invoice | Materials | Liable | Deducted | Paid to them |
|---|---|---|---|---|---|---|
| A: sole trader, registered | 20% | 3,000 | 800 | 2,200 | 440 | 2,560 |
| B: company, gross payment status | 0% | 4,500 | 0 | n/a | 0 | 4,500 |
| C: sole trader, not registered | 30% | 1,600 | 0 | 1,600 | 480 | 1,120 |
| D: company, registered | 20% | 5,200 | 1,700 | 3,500 | 700 | 4,500 |
| Totals | 14,300 | 2,500 | 7,300 | 1,620 | 12,680 |
The return reports 14,300 of payments and 1,620 of deductions across the four lines. C is at 30%, so the verification reference for C goes on the return beside C's entry, and the name for each line should be the name as HMRC holds it. The deductions of 1,620 are due to HMRC by 22 July if paid electronically. A's statement shows what the CIS 340 guide's example statement shows: your employer reference, the month ending 5 July, A's name and UTR, gross amount paid 3,000, less materials 800, amount liable at 20% 2,200, amount deducted 440 and amount payable 2,560. Statements are due by 19 July for A, C and D. B is not owed one, because nothing was deducted, although the CIS 340 guide calls sending a statement for a gross payment good practice.
If you also want the statements built from a payment sheet, the CIS deduction statement template goes through that step on its own. VAT on materials has one wrinkle: the guide says that where a subcontractor is not VAT-registered, the VAT they paid on materials counts as part of the material cost, and where they are registered, it does not.
A verification log that stops payments to unchecked subcontractors
Verification is the step a payment sheet quietly forgets, because it happens outside the money columns. HMRC's guidance says to verify before paying a new subcontractor, that the details must exactly match what the subcontractor used to register, and that HMRC's reply gives the rate or says to pay gross. Give it its own tab. This filled-in version is dated as it might look in July 2026.
| Code | Type | Verified on | Rate HMRC gave | Last on a return | Verify again? |
|---|---|---|---|---|---|
| S01 | Sole trader | 12 April 2025 | 20% | June 2026 | No |
| S02 | Company | 3 September 2024 | 0% (gross) | May 2026 | No |
| S03 | Sole trader | 8 June 2026 | 30% | June 2026 | No |
| S04 | Company | 20 January 2023 | 20% | March 2024 | Yes |
The last column applies the rule that previously used subcontractors need verifying again if they were not on a CIS return in the current or last two tax years. In July 2026 those years are 2026 to 2027, 2025 to 2026 and 2024 to 2025, so a subcontractor last paid in March 2024 needs a fresh check before the next payment. In the sheet, the flag is Yes whenever the last return date falls before 6 April 2024.
The details are where verification fails. A sole trader needs a unique taxpayer reference and a National Insurance number, and HMRC's page says temporary numbers (starting TN, or two digits) cannot be verified. A company needs its registered name, company UTR and registration number. A partnership needs the nominated partner's details, the trading name and the partnership UTR. A trading name typed in place of the registered name is a likely reason for a failed check. This message gets the right details in one go, and because it holds only placeholders, it is safe to draft with an assistant.
Subject: Details I need before I can pay your first invoice
Hi [first name],
I'm registered as a contractor under the Construction Industry Scheme, so I have to verify you with HMRC before I pay you. Please send these exactly as they appear on your HMRC letters:
Sole trader: your full name, your Unique Taxpayer Reference (UTR) and your National Insurance number.
Limited company: the registered company name, the company UTR and the company registration number.
Partnership: the nominated partner's details, the trading name and the partnership UTR.
If you have gross payment status, please say so. I will confirm the rate HMRC gives me before I pay you, and send you a statement within 14 days of the end of each tax month.
Please send the details by [your usual secure route], not in a group chat.
Thanks,
[your name]Building the sheet with AI without handing over personal data
An assistant is good at laying out columns and writing formulas, and poor at knowing which rules applied last month. So give it the structure and keep the rates and dates under your control. The prompt below uses made-up subcontractors on purpose. It never needs a name, a unique taxpayer reference or a National Insurance number, and neither should anything else you paste into a chat tool. Enter those in the finished sheet on your own machine.
I run a small building firm and I'm a contractor under the Construction Industry Scheme.
Build me a spreadsheet for one tax month (6th to 5th) with four tabs: Payments, Statements, Return, Checks.
Payments columns: subcontractor code (S01, S02...), payment date, gross invoice excluding VAT,
materials the subcontractor paid for directly (excluding VAT), other excluded costs,
deduction rate chosen from a drop-down (0%, 20%, 30%), verification reference (needed only at 30%).
Formulas: liable = gross minus materials minus other excluded costs, never below zero;
deduction = liable x rate; paid to subcontractor = gross minus deduction.
Return tab: one row per subcontractor with the month's total payments and total deducted.
Statements tab: one block per subcontractor with gross, materials, liable, rate, deducted, payable.
Checks tab: totals tie back to Payments; only 0, 20 or 30 allowed as a rate; no deduction on a 0% row;
no payment dated outside the tax month; a 30% row must have a verification reference;
flag any row where materials exceed gross.
Dates: from the tax month end date, show the return and statement due date (end date + 14 days)
and the electronic payment due date (end date + 17 days).
Use invented subcontractors only. Do not ask me for names, UTRs or National Insurance numbers.A first answer usually gets several things wrong. These are the slips to look for and fix.
- It takes the VAT-inclusive invoice as the gross figure. A's invoice is 3,000 plus 600 of VAT. With the VAT-inclusive 3,600 in the sum, liable becomes 3,600 minus 800, which is 2,800, and the deduction comes out at 560 instead of 440. A receives 120 less than they should, and will spot it when the statement disagrees with their invoice.
- It hard-codes 20% inside the deduction formula. Replace it with the rate column, or C's 30% and B's 0% are both wrong.
- It treats the tax month as a calendar month. A payment on 3 July belongs to the tax month ending 5 July, not to the next one. Make the Checks tab test each date against the 6th to 5th window.
- It forgets the quiet month. Add a banner on the Return tab: no payments means a nil return or advance notice, not silence.
- It rounds in the wrong place. Keep full precision in the sheet and follow the guidance of whichever filing route you use for how amounts are entered.
Then test the sheet against the worked month above. If every total matches (14,300, 2,500, 1,620 and 12,680), feed it a deliberately wrong row to see that the Checks tab complains. For the lookup formulas and checks, the ChatGPT Excel guide is a useful reference. Subcontractor paperwork chasing covers getting invoices and receipts in on time, which is what makes the materials column trustworthy.
An accountant or bookkeeper: what to ask before you hand it over
Handing the return to a professional is a sound choice when there are many subcontractors, several rates, or materials you cannot evidence easily. The fee depends on the quote, so the useful work is in what it covers.
- Does the fee include verifying new subcontractors, or only filing?
- Who sends the payment and deduction statements, and by what date?
- Who files a nil return in a quiet month, and does the fee apply?
- Who reminds you to pay the deductions by the 22nd?
- What happens if you send payments late in the month, after the books are closed?
- Who has the HMRC login, and will you both file? Agree that only one of you does.
Treat the fee as a trade of time. If your own time is worth 25 pounds an hour and the monthly return takes you three hours, including verification and statements, a fee below 75 pounds a month costs less than doing it yourself. The numbers are assumptions; replace them with yours.
Ten, fifty or a quiet month: matching the route to your month
The rule leans on two figures from the pages above: Xero's Ignite plan enters 10 bills a month, and HMRC's guide says verifying more than 50 subcontractors needs commercial software. Ten as a working threshold is my rule of thumb, not an HMRC number.
| Your month looks like | Start with | Why |
|---|---|---|
| Up to about 10 subcontractor payments, simple invoices, no accounting software | AI-built sheet plus HMRC's free service | Typing ten lines is quick, and the sheet does the deduction maths |
| Up to about 10 payments and you already pay for Xero or QuickBooks | Xero with the CIS add-on, or QuickBooks' CIS feature | Bills, deductions and filing live in one place; check the plan's bill limit |
| 11 to 50 payments, or several rates and heavy materials | Software that files, or an accountant | Re-typing and checking cost more time than the fee |
| More than 50 subcontractors to verify | Commercial CIS software | HMRC says verifying more than 50 subcontractors needs commercial software |
| Months with no payments, or irregular work | Any route, plus a diary reminder for a nil return or an inactivity notice | Quiet months now need action |
The calendar for the 19th: a checklist filled in for July
Print this once, change the dates each month, and keep it with the sheet.
- 5 July. The tax month ends. Stop adding payments to this month's sheet.
- 6 to 10 July. Chase missing invoices and receipts. Any new subcontractor still unverified gets verified before the next payment.
- 11 to 14 July. Run the Checks tab. Compare the totals with the bank payments for the period.
- 15 to 17 July. Send statements to subcontractors who had deductions. Prepare the return lines.
- By 19 July. File the return, or a nil return if nothing was paid and no inactivity notice is in place. Keep a copy of what was filed.
- By 22 July. Pay the 1,620 of deductions electronically (19 July if paying by post).
- Afterwards. File the sheet and receipts so that they can be produced for at least three years after the end of the tax year.
Nothing here is tax advice. Rules, rates and penalty figures change, so confirm them against the gov.uk guide before you rely on any of this, and ask your accountant about anything specific to your contracts. The CIS 340 guide is the reference for the details that matter.
Questions contractors ask about the CIS monthly return
Can I upload a spreadsheet to file a CIS return?
The gov.uk pages I read describe two routes to file: HMRC's CIS online service and recognised commercial CIS software. They mention no spreadsheet upload. Use a sheet to prepare the figures, then type them into the online service or enter them in software, and check the pages again before you rely on any shortcut.
What if I paid no subcontractors this month?
From 6 April 2026 a mainstream contractor who paid no subcontractors in a tax month must file a nil return by the 19th or have notified HMRC in advance that no payments are expected. An inactivity notice can cover up to six months. Without either, a penalty can follow unless you have a reasonable excuse.
Do I need software for only a handful of subcontractors?
No. HMRC's free CIS online service can verify subcontractors and file returns. Software earns its fee when you have many payments, mixed deduction rates or materials to track, or you want bookkeeping and CIS in one place. Verifying more than 50 subcontractors needs commercial software.
Can I file through software and HMRC's service in the same month?
Avoid it. HMRC's CIS 340 guide warns that using the free online service and commercial software at the same time may cause returns to be overwritten. Pick one route per month, and if an accountant files for you, agree that you will not file as well.
Further reads
- AI for Building Contractors: Chasing Subcontractors and Progress Updates — Chase subcontractor invoices and progress without long phone calls.
- Can AI Do My Bookkeeping? What Still Needs an Accountant — What AI bookkeeping still leaves for an accountant.
- AI Tools and AI Development: The Complete 2026 Guide — the AI hub, including every tutorial in the AI-for-business series.
Sources: gov.uk pages read in October 2026: What you must do as a CIS contractor (overview, who is covered, register, verify subcontractors, make deductions, pay deductions, file monthly returns, record keeping, tell HMRC about changes), Use the Construction Industry Scheme online, the CIS 340 guide (updated 27 August 2026) and Simplification and administrative improvements to CIS (13 March 2026); Xero's pricing and construction pages; QuickBooks' CIS and pricing pages; FreeAgent's CIS300 help article and CIS contractors page. Worked figures are invented.