Your Corporation Tax return says you paid subcontractors one figure. Your CIS returns say another. From 5 November, HMRC may write to you about the gap.
TL;DR: From 5 November 2026 to 18 January 2027, HMRC may write to companies whose Corporation Tax return shows subcontractor costs with no CIS return submitted, or costs that don't match their CIS returns. Reconcile the two now, so you can correct an error or evidence the difference.
What Is HMRC Checking?
HMRC is comparing the subcontractor costs on Corporation Tax returns with Construction Industry Scheme (CIS) returns. It says it may contact you by letter between 5 November 2026 and 18 January 2027 if you've included those costs but haven't yet submitted a CIS return, or if they don't match the costs on your CIS return (GOV.UK, 2026).
Any letter will explain the issue HMRC has found, then ask you to correct your return or send evidence that your Corporation Tax return is right. HMRC added this to its list of genuine letters on 4 November.
That's all it has published. The page gives no letter reference, no penalty and no explanation of how the comparison works, and "may" means not every company with a difference will hear from HMRC. We'd treat any firmer claim about this campaign with caution.
Who Is Likely to Get One?
Companies that pay subcontractors for construction work. The check starts from the Corporation Tax return, so HMRC's wording covers limited companies rather than sole traders. A company can be caught in two ways.
The first is simple non-filing. Every contractor must send HMRC a return of all payments made to subcontractors within the scheme, whether those subcontractors were paid gross or under deduction (GOV.UK CIS 340, 2026). A company claiming subcontractor costs with no CIS returns behind them is the obvious case.
The second is a difference between filed figures, and that's the one to take seriously even if your CIS compliance is sound. The two returns are built on different rules, so some difference is normal. What you need is an explanation for it. If HMRC's recent letters on CIS deduction rates reached you, the same monthly returns are the place to start.
Why Don't the Two Figures Match?
Because they measure different things. A CIS return reports payments made in a tax month running from the 6th to the 5th. Company accounts normally record costs when the work is done, over an accounting period that may end on any date.
In our experience, four differences explain most gaps:
- Timing: invoices accrued at the year end but paid afterwards, and last year's accruals paid this year.
- Retentions: CIS treats them like any other payment, so they reach the return when paid, not when the cost is booked (GOV.UK CIS 340, 2026).
- Out-of-scope costs: architects' and surveyors' professional work isn't a construction operation, yet it often lands in the same nominal code.
- VAT: CIS records exclude it, so a ledger posted gross of VAT won't agree.
Compare the total payment figure too, not the labour element. The return shows the total paid and the cost of materials separately, so a supply-and-fix invoice appears in full.
A Simple Reconciliation to Run Now
Start from the CIS returns and adjust towards the ledger. Add up the total payment figure from each monthly return covering the accounting period, then add and remove the known differences. Whatever remains needs investigating.
Here's an illustration, using invented figures for a company with a 31 March year end:
| Reconciliation line | £ |
|---|---|
| Total payments on CIS returns for the year | 380,000 |
| Add: invoices accrued at year end, unpaid | 24,000 |
| Less: last year's accruals paid this year | (16,000) |
| Add: surveyors' fees in the same nominal code | 9,500 |
| Expected subcontractor costs | 397,500 |
| Subcontractor costs on the Corporation Tax return | 402,500 |
| Unexplained difference | 5,000 |
That £5,000 could be a payment left off a CIS return, a miscoded cost or a cash payment nobody recorded properly. What we see most often is a small job paid outside the normal run, which never reached whoever files the return. Keep the finished schedule with the supporting invoices, because it's the evidence you'd send if a letter arrives.
What If You Find a Real Error?
Fix the return that's wrong, and fix it before HMRC asks. CIS returns are corrected through the HMRC CIS online service or recognised commercial software. Company Tax Return amendments must usually be made within 12 months of the filing deadline. After that, you should tell HMRC about any underpaid tax through its online disclosure service (GOV.UK, 2026).
Missing CIS returns should go in straight away. Penalties start at £100 one day late, rise to £200 at two months, and at six and twelve months are the higher of £300 or 5% of the deductions on the return (GOV.UK, 2026). Our CIS nil return guide covers quiet months.
HMRC can also charge penalties on incorrect CIS returns caused by negligence or intent, and on errors in a Company Tax Return, separately from the late-filing penalties on that return. If you find a payment that should have had a deduction, take advice on the tax due before you amend anything.
The Wider Tightening of CIS Rules
HMRC hasn't said why, but this sits alongside a wider tightening of CIS. Since 6 April 2026, a business that knew or should have known a transaction was connected to fraud can lose gross payment status immediately, become liable for the lost tax and face a 30% penalty, and it must wait five years to reapply (GOV.UK, 2025).
The government's costing for those measures is £205 million in 2026-27 (GOV.UK, 2025). Nothing on HMRC's page links the new letters to fraud work, and most differences will be innocent. But a company that can't explain its figures is in a weaker position than it was a year ago, particularly if it relies on gross payment status.
Records matter here. You must keep CIS records for at least three years after the end of the tax year, and you can be fined up to £3,000 if you can't produce them (GOV.UK, 2026). Company records generally need keeping for six years (GOV.UK, 2026).
Frequently Asked Questions
Is 18 January 2027 a deadline for me to act?
No. It's the end of the period in which HMRC says it may write. HMRC hasn't published a response time, so follow whatever date your letter gives. If you have one, confirm it's genuine on HMRC's list of current letters before replying.
What if my figures are right and HMRC's letter is wrong?
Send evidence. HMRC says it will ask you to correct your return or show that your Corporation Tax return is correct, so a reconciliation schedule backed by invoices and your monthly returns is the natural reply. Don't amend a correct return just to make a letter go away.
Do gross-paid subcontractors go on the CIS return?
Yes. The monthly return covers all payments to subcontractors within the scheme, including those paid gross. One question clients always ask is whether no deduction means no reporting. It doesn't.
Does this affect sole traders?
HMRC's page refers only to Corporation Tax returns, so this campaign is aimed at companies. Sole traders who are CIS contractors still have the same monthly filing duties.
If your subcontractor costs and CIS returns have never been compared, talk to our team. Our tax and accounting services cover the reconciliation, and we can help you reply if a letter arrives.