In this section:
- Getting paid and paying tax - advice for subcontractors
- Paying subcontractors - advice for contractors
- How to pay CIS deductions to HMRC if you're a contractor
- Using CIS Online
- Correcting monthly return and payment errors
Correcting monthly return and payment errors
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.
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:
- Dealing with monthly return errors under CIS
- Amending payment errors under CIS
- Summary of typical CIS return errors and required action
- How to contact us to correct errors
If you entered the wrong figures on your return
Sometimes you might put wrong entries on your return such as:
- the wrong business name
- the wrong month or year
- payment amounts that are incorrect because you got the figures the wrong way around
In all of these cases you need to contact us to correct your return. The quickest way to do this is to ring our CIS Helpline on Tel 0845 366 7899 (open from 8.00 am to 8.00 pm, seven days a week).
If you pay a subcontractor the wrong amount
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 us so that we can amend the subcontractor's records. Read the guidance below for more detail on correcting different types of payment mistake.
Underpayments
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.
Overpayments
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:
- stop the cheque through your bank
- issue another cheque for the right amount
- ask them to return the incorrect deduction statement you gave them
- give them a correct deduction statement
- report the actual amount you paid with the second cheque on your CIS return
If the subcontractor's cashed your cheque and they won't repay the money:
- don't correct your CIS return
- contact us so we can amend the subcontractor's records
If you got the VAT wrong
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.
Calculating VAT due
| 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've done this let us know so we can alter the subcontractor's records. You don't have to correct your monthly return if it shows exactly what you've paid out. The subcontractor will have to reclaim the extra deduction you made directly from us.
If you got the materials amount wrong
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. But you must tell us about your mistake so we can update the subcontractor's records.
If you deducted the wrong amount
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. If you make a deduction at the wrong rate, you need to tell us so we can update the subcontractor's records. 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 paid the wrong subcontractor
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:
- delete the entry on your return that refers to the wrong one
- put in the correct details for the right subcontractor for the month when you paid them
If the wrong subcontractor cashed your cheque before they repaid your money:
- don't change the entry for them on your return
- tell us about the mix-up
If you paid a subcontractor outside CIS
You might sometimes buy goods that have nothing to do with construction work from a subcontractor. Don't make any deduction when you pay for these. If you do treat the payment as a CIS payment and make a deduction you must contact us. We'll update the subcontractor's records and they'll be able to reclaim the deduction from us.
Summary of typical CIS return errors and required action
| Type of error | What happens next? | The reason for doing this | Comments |
|---|---|---|---|
| You made an error on your return about a payment | Contact us to ask as 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 us to ask as to amend your return | 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 | Contact us so we can correct the deduction | We need to make sure that everyone's records are correct | |
| You forgot to take off the VAT before you worked out the deductions | Contact us | Your return reflects the amount you paid, but the subcontractor's record needs correcting | |
| You got the amount for materials costs wrong | Contact us to tell us about the over-deduction | The subcontractor's records will need updating | We'll repay the subcontractor |
| You paid the wrong subcontractor - but they didn't cash your cheque | Contact us to ask as to amend your return | The original return doesn't reflect the actual payment situation | |
| You paid the wrong subcontractor - and they cashed your cheque | Contact us to ask as to amend your return and correct the deduction | The original return reflects the right payment amount but to the wrong person | |
| You paid a subcontractor for goods not covered by the CIS | If you paid them gross, leave things as they are. Otherwise, contact us to ask us to correct the deduction | The return reflects the actual payment | We'll repay the subcontractor |
| 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 us to let us know | The original return should reflect what you actually paid - but it still needs to be corrected | We'll repay the subcontractor |
How to contact us to correct errors
Once you've submitted your monthly return you need to contact us 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 our CIS Helpline on Tel 0845 366 7899 (open from 8.00 am to 8.00 pm, seven days a week). 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 us about corrections by writing to your local HMRC Office. Be sure to include the following details so we can trace your CIS return:
- your full name and unique taxpayer reference
- which monthly return you're correcting
- any figures that need adjusting and the correct amounts
- which subcontractor it refers to
If we think you made the errors deliberately or because you were negligent, we 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
Get contact details for your local HMRC Office
