Introduction
The Construction Industry Scheme (CIS) is one of the biggest compliance challenges for UK builders and contractors. On the surface, it seems straightforward — deduct tax from subcontractor payments and submit monthly returns to HMRC. In practice, even small errors can spiral into penalties, disputes, and lost time.
We recently worked with a construction company that had struggled for years with CIS. Years of rushed admin, manual spreadsheets, and missing records had led to:
- Multiple HMRC penalties for late or incorrect CIS submissions
- Subcontractors being paid the wrong amounts
- Statements that didn’t match actual payments
- Growing frustration and distrust across the business
The directors were overwhelmed. They were trying to manage live sites while keeping on top of paperwork, but the system had simply spiralled out of control. That’s when they turned to Hammond & Co.
This is the story of how we untangled years of CIS confusion, rebuilt subcontractor trust, and put in place automated systems that now run like clockwork.
The Situation When They Came to Us
The company — let’s call them Harper & Sons Construction Ltd (fictional example) — employed a core team of eight and worked with around 30 subcontractors across housing and refurbishment projects.
Their CIS process had become unmanageable:
- Invoices submitted by email or text
- Payments calculated informally by site managers
- CIS deductions “guessed” rather than verified
- Returns filed late, sometimes weeks past HMRC deadlines
- Inconsistent subcontractor statements
The result:
🚨 Eight months of late submissions
🚨 Over £4,000 in HMRC penalties and interest
🚨 Frequent complaints from subcontractors
🚨 Bookkeeping so inconsistent reconciliation was impossible
The directors were losing valuable time and feared an HMRC compliance check.
Step 1 – Understanding the Problem
At Hammond & Co, we start by looking at people and processes, not just numbers.
We mapped:
- How subcontractors were onboarded
- How CIS deductions were calculated
- Who approved payments
- Where records were stored
- Which software (if any) was in use
The main issues quickly became clear:
- Unverified subcontractors – leading to inconsistent deductions
- Manual calculations – high risk of human error
- No deadline tracking – returns filed late
- Disjointed communication – site managers, admin, and directors all using separate systems
Our goal was to simplify, automate, and create a clear, compliant process.
Step 2 – Stabilise and Stop Penalties
Phase 1 focused on stopping fines from mounting:
- Took over CIS submissions via secure HMRC agent access
- Verified every active subcontractor
- Resubmitted missed returns and appealed penalties with reasonable cause
- Set up automated reminders for all future deadlines
This immediately halted new penalties and reassured HMRC that the business was addressing the issues.
Step 3 – Reconcile the Past
Next, we rebuilt accurate CIS records for the previous 12 months:
- Created a master CIS tracker linked to Xero
- Matched subcontractors to verified HMRC records
- Corrected under- and over-deductions
- Produced accurate statements for all subcontractors
- Submitted amended returns to HMRC
Over 280 transactions were corrected. By the end, Harper & Sons had a fully reconciled and compliant CIS history — something they hadn’t achieved in years.
Step 4 – Systemise for the Future
Fixing the past is only part of the solution. To prevent future issues, we implemented:
- Xero for bookkeeping and CIS submissions
- BrightPay for payroll and subcontractor management
- Dext for instant invoice and receipt capture on site
We trained the office team to:
- Upload invoices daily to Dext
- Approve payments only after HMRC verification
- Use Xero’s CIS module for automatic deductions
- Send professional monthly CIS statements with one click
We also introduced monthly financial health checks, reviewing CIS returns, payroll, and cash flow to ensure compliance year-round.
The Outcome
Within three months, the company was transformed:
✅ HMRC penalties stopped – no new fines or late filings
✅ Historic penalties reduced – £2,800 of £4,000 successfully appealed
✅ Subcontractor trust restored – accurate, timely statements for everyone
✅ CIS now automated – minimal admin and full compliance
✅ Directors regained time – no more evenings wrestling with spreadsheets
Director feedback: “For the first time, we actually understand CIS. Everything is clean, clear, and stress-free.”
Lessons Learned
Many construction firms face similar issues:
- Manual systems invite errors
- Lack of clear ownership leads to missed deadlines
- Unverified subcontractors trigger HMRC red flags
- Inconsistent statements erode trust
CIS may seem minor, but when mismanaged, it affects cash flow, compliance, and reputation.
How Hammond & Co Prevents These Problems
Our CIS framework combines people, processes, and technology:
- Verification first – every subcontractor checked with HMRC
- Digital onboarding – ID and bank details uploaded securely
- Real-time deductions – automatic calculations in Xero
- Monthly filing – returns submitted by the 19th, every time
- Automated statements – emailed directly to subcontractors
- Monthly reviews – ensure bank feed matches CIS deductions
This system keeps CIS compliant, accurate, and stress-free.
Why Specialist Support Matters
A general accountant may file returns correctly, but construction-specific pitfalls — CIS, Reverse Charge VAT, subcontractor payments — require sector knowledge.
Hammond & Co does more than submit forms:
- Spot cash-flow risks
- Forecast tax positions
- Build scalable systems as the business grows
Clients gain compliance, clarity, and time back to focus on running projects.
Key Takeaways
- CIS errors can quickly spiral into thousands in penalties
- Accurate statements protect subcontractor confidence and your reputation
- Manual systems are the main cause of CIS chaos
- Digital solutions like Xero, BrightPay, and Dext simplify compliance
- Construction-focused accountants ensure accuracy, timeliness, and trust
Conclusion
Harper & Sons Construction came to us stressed, with late returns, HMRC fines, and unhappy subcontractors. Within three months, they were fully compliant, confident, and in control.
If this feels familiar, don’t wait for HMRC to act first. With Hammond & Co, you can clean up CIS, prevent penalties, and run your construction business efficiently every month.
Let’s get your company compliant, confident, and future-ready.