What happens if you don’t pay CIS?

What happens if you don’t pay CIS?

If you work in construction, the Construction Industry Scheme (CIS) affects how tax is collected and paid. Whether you are a contractor or subcontractor, the rules are strict and deadlines matter.

If CIS payments or returns are missed, problems can escalate quickly. Penalties, interest, enforcement action and reputational damage are all possible outcomes. The good news is that many issues start with simple admin errors and can often be resolved if addressed early.

This guide explains what happens if you don’t pay CIS, how HMRC responds, and what you can do to put things right.

CIS responsibilities explained

Under CIS, contractors have legal obligations every month.

Before paying subcontractors, contractors must verify them with HMRC and apply the correct deduction rate. Registered subcontractors are deducted at 20%. Unregistered subcontractors are deducted at 30%.

Contractors must then:

• Submit a monthly CIS return
• Pay CIS deductions to HMRC by the 22nd of the month (or the 19th by post)
• Issue payment and deduction statements to subcontractors
• Keep CIS records for at least three years

Even if no subcontractors were used, a nil return must still be submitted.

What happens when you miss a CIS deadline?

HMRC does not require reminders before taking action. If a CIS return or payment is late, penalties begin automatically.

Common triggers include:

• Missing a monthly CIS return
• Paying deductions late
• Submitting incorrect information
• Failing to submit a nil return

Once a deadline is missed, HMRC’s systems flag the account quickly.

CIS penalties and interest

Late CIS returns trigger automatic penalties:

• £100 if the return is one day late
• An additional £200 after two months
• After six months, £300 or 5% of the CIS due (whichever is higher)
• After twelve months, a further £300 or 5%

On top of this, HMRC can charge daily penalties of up to £100 per day, capped at £3,000.

Interest is also charged on late payments from the due date. The interest rate is linked to the Bank of England base rate and increases the longer the debt remains unpaid.

If HMRC believes errors were careless or deliberate, penalties can rise significantly.

HMRC enforcement action

If CIS non-payment continues, HMRC may escalate beyond penalties.

This can include:

• Compliance checks or investigations
• Issuing estimated assessments
• Passing debt to collection agencies
• Court action
• Seizure of assets such as vehicles or equipment
• Winding-up petitions for companies

HMRC has wide-ranging powers and often uses automated cross-checks with other tax data to identify inconsistencies.

Impact on your business reputation

CIS non-compliance can affect more than finances.

If you hold Gross Payment Status, HMRC can withdraw it if you fail to meet compliance standards. This results in immediate deductions from future payments, which can disrupt cash flow.

Many contractors and public sector clients require proof of tax compliance. A poor CIS record can limit access to contracts and damage long-term business relationships.

Legal consequences of ongoing non-compliance

In serious cases, HMRC may pursue criminal action.

Persistent or deliberate non-payment can lead to:

• Criminal prosecution
• Unlimited fines
• Director disqualification
• Personal liability for company directors

Under existing legislation, HMRC can also place businesses into enhanced monitoring programmes, increasing scrutiny across all taxes.

How CIS non-payment affects subcontractors

Subcontractors may still feel the impact of CIS failures, even if they are not responsible for filing returns.

If contractors fail to submit accurate deductions, subcontractors may face:

• Incorrect tax records
• Delays or issues with refunds
• Unexpected tax bills

Keeping personal records and payment statements is essential to protect your position.

How to fix CIS payment problems

If you have missed CIS payments or returns, acting quickly is important.

Steps to take include:

• Contact HMRC as soon as possible
• Correct any errors in previous returns
• Request a Time to Pay arrangement if needed
• Provide explanations where genuine circumstances apply

HMRC is generally more flexible when issues are addressed early and openly.

How to avoid CIS issues in future

Preventing CIS problems usually comes down to organisation and support.

Helpful steps include:

• Keeping accurate digital records
• Using accounting software with CIS functionality
• Submitting returns early
• Getting professional support when unsure

Proactive compliance reduces risk and stress.

How RIFT can help with CIS compliance

CIS rules can be difficult to manage alongside day-to-day construction work.

RIFT supports contractors and subcontractors with CIS registration, compliance, tax returns and refunds. We help keep your records accurate, submissions on time and HMRC issues to a minimum. If you are behind or unsure where you stand, it is better to check early than let problems grow.

CIS non-payment FAQs

What happens if I don’t submit a CIS return?

HMRC will issue automatic penalties even if no tax was due.

Can HMRC take my assets for unpaid CIS?

In serious cases, HMRC can seize assets or pursue court action.

Can CIS penalties be appealed?

Yes, if you have a reasonable excuse and act within HMRC deadlines.

Does missing CIS affect my tax refund?

Yes. Incorrect CIS records can delay or reduce refunds.