Introduction: The Hidden Cost of CIS Mistakes

The Construction Industry Scheme (CIS) isn’t just about filing returns — it’s about avoiding the financial sting of HMRC penalties.

Late returns, inaccurate deductions, or false declarations can quickly spiral into thousands of pounds in fines. And when HMRC raises an assessment, you’re left fighting uphill to prove your records are correct.

This article breaks down the CIS penalty regime, HMRC’s assessment powers, and dispute routes — showing why professional oversight is essential to protect your business.

CIS Penalties: How They Escalate

HMRC penalties under CIS are automatic and stack quickly:

• £100 → immediately if return is 1 day late.

• £200 → after 2 months.

• £300 or 5% of deductions (whichever higher) → after 6 months.

• Further £300 or 5% → after 12 months.

• Daily penalties → can apply for persistent failures.

• Incorrect filings → fines if deductions or verification details are wrong.

👉 Even if no subcontractors were paid, a nil return must still be filed — or penalties apply.

🔗 HMRC: CIS Returns & Penalties

HMRC Assessments: When Records Don’t Match

If HMRC suspects underpayment or receives inconsistent returns, it can issue a CIS assessment. This is essentially HMRC deciding what you owe — often much higher than reality.

• Assessments can include PAYE/NIC linked to CIS.

• Interest is added immediately.

• Burden of proof sits with the contractor or subcontractor.

Without strong records, challenging an assessment is almost impossible.

False or Misleading Statements

HMRC takes a zero-tolerance approach to fraud or negligence under CIS. Penalties apply where:

• Contractors issue false verification or deduction statements.

• Subcontractors apply for Gross Payment Status (GPS) using misleading information.

• Anyone encourages or assists in false CIS declarations.

Penalties can extend beyond fines to loss of GPS and even criminal investigation in serious cases.

Disputes & Appeals: Your Rights

If you receive a CIS penalty or assessment, you do have rights:

• Appeal to HMRC if you have a reasonable excuse (e.g., serious illness, system failure).

• Escalate to the First-tier Tribunal if HMRC refuses.

• Professional representation massively improves outcomes — appeals often hinge on technical details.

How Wexley Defends Clients Against CIS Penalties

At Wexley & Associates, we:

• Ensure CIS returns are filed correctly and on time — every time.

• Handle HMRC correspondence and appeals on your behalf.

• Prepare strong evidence packs to overturn unfair assessments.

• Advise subcontractors on protecting Gross Payment Status.

With us in your corner, you don’t just stay compliant — you stay protected.

Don’t Let CIS Penalties Drain Your Business

CIS penalties aren’t just a nuisance — they’re a major financial risk. Without expert management, late filings or HMRC assessments can wipe out profit margins.

👉 Contact Wexley & Associates today to secure expert CIS compliance and professional defence against penalties.

References

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

• HMRC: CIS Returns & Penalties

• Related Wex Insider article: CIS Monthly Returns: How Contractors Stay Compliant