Introduction
The Construction Industry Scheme (CIS) is one of the biggest compliance challenges for UK builders and contractors. It sounds simple — deduct tax from subcontractor payments and submit monthly returns to HMRC — but in reality, it’s one of the easiest areas to get wrong.
We recently worked with a construction company that learned this the hard way. Years of rushed admin, manual spreadsheets, and missing records had led to:
- Multiple HMRC penalties for late or incorrect CIS submissions
- Subcontractors complaining that they’d been paid the wrong amounts
- CIS statements that didn’t match payments
- A growing sense of frustration and distrust across the business
The directors were overwhelmed. They’d tried to keep on top of compliance themselves while managing several live sites, but the paperwork had spiralled out of control. That’s when they turned to Accounting Matters.
This is the story of how we helped them untangle years of CIS confusion, rebuild subcontractor confidence, and create systems that now run like clockwork.
The Situation When They First Came to Us
The company — let’s call them Harper & Sons Construction Ltd (fictional example) — employed a core team of eight and regularly used around 30 subcontractors across their housing and refurbishment projects.
For years, they had handled CIS internally. The process looked like this:
- Subcontractors submitted invoices by email or text.
- Payments were made based on the site manager’s list of hours worked.
- CIS deductions were calculated by “gut feel” rather than verification.
- Returns were filed late — often weeks after the HMRC deadline.
- CIS statements were sent sporadically, sometimes missing key details.
The result?
🚨 Eight months of late CIS submissions
🚨 Over £4,000 in HMRC penalties and interest
🚨 Frequent subcontractor complaints about missing or incorrect deductions
🚨 Inconsistent bookkeeping that made reconciliation impossible
The directors were losing valuable time on admin and starting to worry about an HMRC compliance check. They knew things had to change.
The First Step – Understanding the Problem
At Accounting Matters, we never jump straight into numbers. We start with people and processes.
We met with the directors and their office administrator to map out:
- How subcontractors were onboarded
- How CIS was being calculated
- Who approved payments and when
- How records were stored (both digital and paper)
- What software was being used (none that could handle CIS correctly)
It quickly became clear that the main problems were:
- Lack of verification – many subcontractors hadn’t been verified with HMRC, so deductions were inconsistent.
- Manual calculations – high risk of human error.
- No deadline tracking – CIS returns were being filed late simply because no reminders existed.
- Disjointed communication – site managers, admin staff, and directors were all using separate systems.
Our goal was to simplify everything — automate where possible, build a clear timeline for compliance, and restore subcontractor confidence.
The Accounting Matters Approach
We broke the project into three clear phases:
Phase 1 – Stabilise and Stop the Penalties
Our immediate goal was to stop the HMRC fines from piling up. Within the first week, we:
- Took over CIS submissions directly through our secure HMRC agent access.
- Verified every active subcontractor with HMRC.
- Re-submitted any missed returns and appealed penalties where reasonable cause could be demonstrated.
- Set up automated calendar alerts for future filing deadlines.
This alone stopped new penalties from accruing and reassured HMRC that the business was taking corrective action.
Phase 2 – Reconcile the Past
Next, we needed to rebuild accurate CIS records. This meant going through every payment for the previous 12 months and matching them against subcontractor invoices and bank statements.
It wasn’t glamorous work — but it was essential.
We:
- Created a master CIS tracker in Excel linked to Xero.
- Matched each subcontractor to their verified HMRC record.
- Corrected deduction errors (some had been under-deducted, others over-deducted).
- Produced accurate CIS statements for every subcontractor for the entire period.
- Submitted amended CIS returns to HMRC where required.
In total, we corrected over 280 individual transactions.
By the end of this phase, Harper & Sons’ CIS history was clean, complete, and reconciled — something they hadn’t achieved in years.
Phase 3 – Systemise for the Future
Fixing the past is one thing. Preventing the same issues from happening again is the real win.
We implemented a digital CIS and bookkeeping system using:
- Xero for bookkeeping and CIS submission
- BrightPay for integrated payroll and subcontractor management
- Dext for capturing invoices and receipts instantly on-site
We trained the office team to:
- Upload subcontractor invoices into Dext daily
- Approve payments only after HMRC verification
- Use Xero’s CIS module to calculate deductions automatically
- Send professional CIS statements to subcontractors each month with one click
We also introduced monthly financial health checks, where we review CIS returns, payroll, and cash flow together — ensuring compliance stays on track year-round.
The Outcome
Within three months, the transformation was complete.
Here’s what changed:
✅ HMRC penalties stopped – No late filings, no new fines.
✅ Historic penalties reduced – We successfully appealed £2,800 of the £4,000 in fines.
✅ Subcontractor trust restored – Every worker received accurate statements and clear proof of deductions.
✅ CIS now automated – Returns file on time every month, with minimal admin.
✅ Directors regained time – No more Friday nights battling spreadsheets.
The directors told us, “For the first time, we actually understand what’s happening with CIS. Everything is clean, clear, and stress-free.”
Lessons Learned – Why Construction Firms Struggle with CIS
This case isn’t unique. Many construction firms face the same problems:
- Manual systems – Too much paperwork and too many chances for human error.
- No process ownership – Everyone assumes someone else has handled CIS.
- Late submissions – Deadlines missed because site work takes priority.
- Unverified subcontractors – Wrong deduction rates trigger HMRC red flags.
- Inconsistent statements – Subcontractors can’t reconcile payments and start losing trust.
CIS might seem like a small part of the business, but when it breaks down, it affects everything — cash flow, compliance, and reputation.
How Accounting Matters Prevents These Issues
For our construction clients, we’ve developed a proven CIS management framework that keeps everything compliant and simple:
- Verification first – every subcontractor is checked with HMRC before payment.
- Digital onboarding – subcontractors upload ID and bank details securely.
- Real-time deductions – software calculates CIS automatically based on HMRC rules.
- Monthly filing – CIS returns submitted by the 19th, without fail.
- Automated statements – professional reports emailed directly to subcontractors.
- Monthly reviews – we check all CIS data against your bank feed to ensure accuracy.
This combination of people, process, and technology ensures your CIS stays compliant — permanently.
Why Specialist Support Matters
A general accountant might file your returns correctly but still miss construction-specific pitfalls. The CIS scheme, reverse charge VAT, and subcontractor payments all require deep sector knowledge.
At Accounting Matters, we don’t just file forms — we understand how CIS fits into your entire operation. We can spot cash-flow risks, forecast your tax position, and make sure your systems are scalable as your team grows.
Because we specialise in construction, our clients get more than compliance. They get peace of mind and time back to run their projects.
Key Takeaways
- CIS mistakes can spiral quickly into thousands in penalties.
- Subcontractor confidence is crucial — accurate statements protect your reputation.
- Manual systems are the root cause of most CIS chaos.
- Digital solutions like Xero, BrightPay, and Dext make compliance simple.
- Partnering with a construction-focused accountant ensures accuracy, timeliness, and trust.
Conclusion
Harper & Sons Construction came to us under immense pressure — late CIS returns, HMRC fines, and unhappy subcontractors. Within three months, they were compliant, confident, and fully in control.
If you recognise yourself in their story, you’re not alone. Many growing contractors face the same problems — especially when admin competes with on-site work. The key is to act before HMRC does.
At Accounting Matters, we specialise in cleaning up CIS chaos and keeping it that way. We’ll rebuild your records, stop the penalties, and put systems in place so your business runs smoothly every month.
Don’t let CIS hold your business back.
Let’s get your construction company compliant, confident, and future-ready.
📩 welcome@accountingmatters.co.uk
📞 01773 747990
🌐 www.accountingmatters.co.uk