Paying CIS deductions from the business bank account

A contractor under the Construction Industry Scheme deducts tax from relevant subcontractor payments and passes that money to HMRC. If the company also employs staff, PAYE, National Insurance and CIS deductions can be paid together under the same PAYE/CIS scheme, so payroll records and subcontractor records need to reconcile before the bank payment is released.

Verify the subcontractor and apply the deduction rate HMRC requires

GOV.UK says contractors normally deduct 20 percent from registered subcontractors who have been verified, 30 percent from unregistered or unverified subcontractors, and 0 percent where the subcontractor has gross payment status. The deduction is an advance payment toward the subcontractor's tax and National Insurance bill.

Calculate the deduction from the amount subject to CIS rather than blindly applying the percentage to every line on the invoice. GOV.UK's contractor guidance explains how items such as VAT and qualifying materials are treated. Keep the verification result and payment-and-deduction statement with the subcontractor ledger.

Electronic CIS deductions are normally due to HMRC by the 22nd after the tax month

HMRC's August 2026 CIS 340 guidance says deductions for a tax month are due within 14 days after the end of the month, or within 17 days where payment is made electronically. In practical terms, that is normally the 19th by non-electronic methods or the 22nd for electronic payment, subject to the rules where the date falls on a weekend or bank holiday.

For example, deductions made in the tax month from 6 May to 5 June are normally due by 22 June when paid electronically. Put the date into the monthly contractor calendar alongside the CIS return so filing and payment are treated as connected but separate obligations.

A contractor with employees can make one payment covering PAYE, National Insurance and CIS deductions

GOV.UK says HMRC creates a CIS payment scheme when a contractor registers. If the business already has employees, HMRC changes the existing PAYE scheme to a PAYE/CIS scheme. The employer then makes one monthly or quarterly payment covering the PAYE tax, National Insurance and CIS deductions due.

Build one payment reconciliation before the bank transfer. If payroll shows £18,000 PAYE and National Insurance and the subcontractor ledger shows £12,000 CIS deductions, the finance team should understand why the HMRC payment is £30,000, subject to any valid adjustments. Do not pay the payroll number first and discover the CIS amount after the deadline.

Use the 13-character Accounts Office reference without spaces

HMRC's CIS 340 guidance was updated in August 2026 to make the reference rule explicit: contractors should use their 13-character reference number without spaces when making CIS payments to HMRC. The CIS payment helpline also tells contractors to have the Accounts Office reference available.

Keep that reference in the controlled tax-payment record rather than relying on an employee's personal banking template. A CIS late-filing penalty uses a different 14-character reference beginning with X, so do not use a penalty reference for ordinary monthly deductions or the Accounts Office reference for a penalty payment.

CIS deductions use the same payment routes as employers' PAYE

GOV.UK says contractors pay CIS deductions in the same way as PAYE and National Insurance. HMRC's PAYE payment guidance supports Faster Payments, CHAPS and Bacs, with Faster Payments usually same or next day, CHAPS normally same working day within bank cut-offs and Bacs normally taking three working days.

Check bank transaction limits when the contractor has a large subcontractor workforce. A monthly CIS and PAYE liability can be much larger than normal supplier payments. If Direct Debit is used, HMRC's central Direct Debit service says it should be set up at least five working days before the payment is due and the account must be a UK bank account.

Match the monthly return, subcontractor statements and bank payment

Keep a schedule showing each verified subcontractor, gross amount, deduction basis, CIS deducted and net amount paid. Total the deductions for the tax month and reconcile them to the CIS return and HMRC payment. If the contractor has employees, reconcile the combined PAYE/CIS amount as well.

HMRC's CIS guide says deductions due must be paid even where the contractor failed to make the deduction from the subcontractor correctly. That makes review before subcontractor payment important. A calculation error can leave the contractor funding tax from its own cash while still needing to correct the subcontractor records and monthly return.