How does CIS payments work?

The Construction Industry Scheme (CIS) is essential for contractors and subcontractors. This scheme mandates that contractors deduct money from subcontractors’ payments and submit it to HMRC. 

These deductions are advance payments toward the subcontractor’s tax and National Insurance. CIS payments also involve knowing the specific rates and processes for deductions, as well as the compliance requirements set by HMRC. 

Meeting these requirements can be challenging, but recognizing common mistakes in CIS tax payments helps you avoid penalties and maintain smooth operations.

Why Is It Essential to Avoid Making CIS Tax Mistakes?

Proper management of CIS tax is essential for maintaining financial health, ensuring legal compliance, and fostering good relationships with your subcontractors. 

CIS tax payment errors can lead to penalties, strained business relations, and cash flow issues, which can undermine your business operations.

Common Mistakes in CIS Tax Payments

Mistake 1: Incorrect Registration

One of the most common mistakes is failing to register correctly with HMRC. Without proper registration, you may face severe penalties and disruptions in your business operations. Ensure you complete all necessary steps during the registration process to avoid complications.

Primo Umbrella’s platform simplifies the registration process, ensuring all details are correctly submitted to HMRC.

Mistake 2: Failing to Verify Subcontractors

Verifying subcontractors with HMRC is essential. Skipping this step can lead to incorrect tax deductions and potential legal issues. Always verify subcontractor status to ensure compliance and accurate payment processing.

Primo Umbrella offers automated subcontractor verification to reduce human error and ensure compliance with HMRC regulations.

Mistake 3: Incorrect Deductions

Errors in calculating and making deductions from subcontractor payments are common. Miscalculations can result in overpaying or underpaying taxes, which can attract penalties. It is important to double-check calculations and ensure deductions are accurately applied.

Primo Umbrella’s software automatically calculates deductions, minimizing the risk of errors and ensuring accurate payments.

Mistake 4: Late Filing of CIS Returns

Not submitting CIS returns on time can lead to penalties and interest charges. Timely filing is crucial to maintaining compliance and avoiding additional costs. Implement a schedule to ensure all returns are filed promptly.

Primo Umbrella’s platform includes reminders and automated filing features, helping you meet deadlines and avoid penalties.

Mistake 5: Incorrect Payment to HMRC

Making incorrect or late payments to HMRC can cause significant issues. Ensure payments are accurate and made on time to avoid penalties and interest charges. Regularly review payment schedules and amounts to stay on track.

Primo Umbrella provides detailed payment schedules and automatic payment processing to ensure timely and accurate payments to HMRC.

Mistake 6: Poor Record Keeping

Maintaining accurate and complete records is vital for CIS compliance. Poor record keeping can lead to errors in reporting and difficulties during audits. Keep thorough records of all transactions, payments, and correspondence related to CIS.

Primo Umbrella’s cloud-based system ensures all records are stored securely and can be accessed easily, improving your record-keeping processes.

How to Avoid CIS Tax Payment Mistakes

  • Use Cloud-Based Payroll Software

Cloud-based payroll software, such as Primo Umbrella, can automate your processes, ensure compliance, and reduce errors. These platforms offer features such as automated tax calculations, real-time updates on HMRC regulations, and streamlined record-keeping.

  • Regular Training and Updates

Staying updated with HMRC regulations and training your staff on CIS requirements is essential. Regular training sessions can keep your people updated about the latest changes and best practices in CIS compliance.

  • Regular Audits and Checks

Conducting regular internal audits can identify and correct mistakes promptly. Audits ensure that your processes are working correctly and that any discrepancies are addressed before they become significant issues.

  • Seek Professional Advice

Consulting with a tax professional or accountant for complex CIS issues can provide you with valuable insights and guidance. Professionals can help you navigate the complexities of CIS compliance and avoid costly mistakes.

Benefits of Avoiding CIS Tax Payment Mistakes

Some of the key benefits of avoiding CIS tax mistakes include:

  • Ensuring compliance with HMRC regulations 
  • Avoiding financial penalties 
  • Maintaining smooth business operations 
  • Building trust with subcontractors 

Proper management of CIS tax can enhance your business reputation and ensure long-term success.


Avoiding common CIS tax mistakes is essential to maintain compliance and ensure smooth business operations. Understanding these common errors and implementing strategies to prevent them can protect your business from financial and legal issues.

You can also mitigate common mistakes in CIS tax payments by using the Primo Umbrella pay and bill software. Our software automates many of the processes involved in managing payroll and billing.

Primo Umbrella is an excellent solution for improving CIS compliance. With advanced features and functionalities, this dedicated software automates your essential CIS payroll and billing processes, increasing efficiency and ensuring adherence to the scheme. To request a demo, you can get in touch with our team.