CIS in the Digital Era: Preparing for Making Tax Digital (MTD)

Why CIS is Moving Digital

The Construction Industry Scheme (CIS) has long been one of HMRC’s most closely monitored tax regimes. Now, with the rollout of Making Tax Digital (MTD), HMRC is preparing to bring CIS into the digital compliance landscape.

This shift means contractors and subcontractors will need to maintain fully digital records, submit updates more regularly, and ensure their systems can cope. For those already struggling with monthly CIS returns, the added digital requirements could become overwhelming.

In this article, we explain how CIS is evolving under MTD, what contractors should expect, and why early preparation with professional support is essential.

What is Making Tax Digital (MTD)?

• HMRC’s flagship programme to modernise tax administration.

• Requires businesses to keep digital records and submit updates through approved software.

• Currently applies to VAT and is being extended to Income Tax Self-Assessment (ITSA) from April 2026.

CIS will not be excluded — it’s expected to integrate with MTD rules in the coming years.

🔗 HMRC: Making Tax Digital Overview

How CIS Will Be Affected by MTD

1. Digital Record-Keeping

Contractors will need to:

• Record subcontractor payments, deductions, and materials digitally (no manual spreadsheets).

• Use MTD-compatible software that links directly to HMRC systems.

2. Quarterly Reporting

• In addition to monthly CIS returns, quarterly MTD submissions will likely become mandatory.

• This creates dual compliance duties that need streamlined processes to avoid errors.

3. Reduced Tolerance for Errors

• HMRC will compare CIS data with MTD submissions in real time.

• Inconsistencies may trigger automatic penalties or enquiries.

The Risks of Not Preparing Early

• Penalties for late/incorrect digital submissions.

• Cash flow disruption if CIS refunds are delayed due to errors.

• Loss of Gross Payment Status (GPS) if compliance lapses.

• Increased HMRC scrutiny on contractors with poor digital processes.

How Wexley Future-Proofs CIS Compliance

At Wexley & Associates, we:

• Set up digital record-keeping systems ready for MTD.

• Integrate CIS data with broader MTD obligations (VAT, ITSA, PAYE).

• Ensure CIS returns and MTD updates are consistent to avoid penalties.

• Advise contractors on software choices and automation to cut admin.

Our goal is to keep you compliant today — and one step ahead of tomorrow.

Get Digital-Ready Now

The move to MTD is not optional — and CIS contractors who delay risk last-minute chaos, penalties, and cash flow issues.

👉 Contact Wexley & Associates today to future-proof your CIS compliance and get your business ready for the digital tax era.

References

• HMRC: CIS 340 – Construction Industry Scheme: Guide for Contractors and Subcontractors

• HMRC: Making Tax Digital Overview

• Related Wex Insider article: Recent 2024/25 CIS Updates