The letter lands in June. A penalty notice from HM Revenue and Customs — £100 — for a return your firm never sent, covering a month in which, as far as anyone in the office can remember, nothing happened. No subcontractors were paid. No tax was deducted. There was nothing to report. Which is exactly the problem, because “nothing to report” is now a report you have to make.
Here’s the background, in plain terms. If your firm pays other businesses to do construction work — a groundworks gang, a brickwork sub, a labour-only crew — you sit inside the Construction Industry Scheme, which everyone shortens to CIS. Under it, when you pay a subcontractor you usually hold back a slice of the labour part of the bill and send it to HMRC as an advance on that subcontractor’s tax. And every month you have to tell HMRC what you did — who you paid, how much, what you deducted. That’s the monthly CIS return, due by the 19th. One wrinkle worth knowing: the taxman’s months don’t follow the calendar. A tax month runs from the 6th of one month to the 5th of the next.
The rule that came back
For the last ten years, a month with no subcontractor payments was a month you could stay silent. There used to be a requirement to file a “nil return” — a return that says, formally, we paid nobody — but it was dropped in 2015. The trouble was that silence turned out to be ambiguous. HMRC couldn’t tell a firm having a quiet month from a firm that had forgotten to file, so penalty notices went out to firms that owed nothing, appeals flew back, and penalty debt piled up that in many cases was never really due. HMRC’s answer, a decade on, is to make the report mandatory again.
So, from 6 April this year, the rule is this. If your firm has paid subcontractors under CIS before, and a tax month goes by in which you pay none, you must still file a return — a nil return — by the 19th, same as always. The only way out is to tell HMRC in advance, at least a fortnight before the tax month starts, that you won’t be paying anyone that month. Do neither and the standard late-filing penalty applies: £100 straight away, another £200 if the return is still outstanding two months later. Not ruinous. Just money out the door for a month in which your firm did nothing wrong except say nothing.
Who this actually bites
Not the firms you’d expect. If you pay subcontractors every month, your normal return already goes in and nothing about your routine has to change. The rule bites the firms whose use of subcontractors is lumpy. The firm that does most things with its own crews and subs out the overflow. The groundworks contractor that brings in specialists three times a year. The fit-out firm sitting between phases, with nothing on the books until the next job starts. For them, quiet months are normal — and every quiet month is now a filing deadline.
The reason it catches people is worth being honest about. In most offices the CIS return is welded to the payment run. Someone pays the subbies, and paying the subbies is what reminds them the return is due. No payments, no reminder. The quiet month is precisely the month when nobody’s mind is on subcontractors — that’s what made it quiet.
And quiet months are where “whose job is it” breaks down. Plenty of firms have an accountant or payroll bureau file the return, working from whatever the office sends over. In a nil month nobody sends anything — there’s nothing to send. The bureau takes no news to mean no return needed. The office assumes the bureau has it covered. The 19th passes in silence, and the silence now costs £100.
One small piece of good news came in the same set of regulations: payments made to local authorities and certain other public bodies are no longer within the scheme at all. If youIf you’ve ever had to go through the verification dance before paying a council for works, that oddity is gone.rsquo;ve ever had to check a councilIf you’ve ever had to go through the verification dance before paying a council for works, that oddity is gone.rsquo;s tax status with HMRC before paying it for works, that oddity is gone.
What fixed looks like
This is not an argument for buying a compliance platform. The fact HMRC wants from you each month is one your business already holds: did any money go to a subcontractor between the 6th and the 5th? If your job and payment records live somewhere structured — rather than across a ledger, a spreadsheet and someone’s memory — that question answers itself, without anyone needing to remember to ask. What you want is a system that puts its hand up on the 6th with one of two messages. Here are the subcontractors you paid, and the return is due by the 19th. Or: you paid nobody, and the nil return needs to go in.
Deadlines that arrive whether or not anything happened are exactly what software is for. People remember obligations by association — the invoice on the desk, the subbie chasing payment. Take away the trigger and the obligation vanishes with it. A system doesn’t work by association. The 6th arrives, the check runs, the prompt fires. That’s the whole trick, and it doesn’t need ten modules to do it.
Where this doesn’t apply
Some readers can put this down now. If you pay subcontractors every single month, nothing here changes for you. If your accountant or bureau files your returns, one email asking “do you file our nil months — yes or no, in writing” might be all this ever costs you, and you should send it this week rather than build anything. If you’ve never engaged a subcontractor, the rule doesn’t touch you at all. And if you’ve genuinely stopped using subcontractors for a season, the advance notification to HMRC exists for exactly that — use it.
The nil return is a small obligation. But the pattern behind it — a deadline owned by nobody, tied to information nobody holds in one place — is the same pattern I find behind most of the expensive problems in the firms I audit. If a £100 letter has already landed on your desk this summer, it’s worth asking what else in the business runs on the same wiring. Get in touch.