If you are a contractor and you paid no subcontractors last month, you now have something to file. From 6 April 2026 the nil return obligation is reinstated for mainstream contractors: a nil return or a notification of inactivity, by the 19th. It had been removed in 2015, and HMRC's stated reason for bringing it back is worth reading, because it explains why the penalty exposure was worse without it.
Article · 21 July 2026
Part of the CIS simplification package taking effect on 6 April 2026, amending regulation 4 of SI 2005/2045 under powers in FA 2004 sections 60(7) and 70 and TMA 1970 section 98A(1).
Mainstream contractors: where no subcontractors were paid in a tax month, the contractor must file a nil return or notify HMRC of a period of inactivity, by the 19th of the month.
Deemed contractors — businesses outside construction that crossed the £3 million rolling twelve-month spend threshold — are not legally required to file a nil return. But if they neither file nil nor notify inactivity, HMRC will issue a penalty, cancelled only once the deemed contractor subsequently confirms that no subcontractors were paid. In other words: no legal obligation, but a penalty and then an argument. Most deemed contractors will find it easier to file.
The nil filing obligation was removed in 2015 as a burden reduction. HMRC's stated reason for reinstating it is that removal did not reduce burdens and produced erroneous late-filing penalties.
That is an unusually candid explanation and it matches what we saw in practice. Without a nil return, HMRC's records could not distinguish "this contractor paid nobody this month" from "this contractor has not filed". The system defaulted to the second reading, penalties were issued, and somebody then spent an afternoon getting them cancelled. Filing a nil return takes a minute; appealing a penalty for not filing one takes considerably longer.
CIS late-filing penalties are charged per return, not per pound of tax. That is the whole problem with quiet months.
| How late | Penalty |
|---|---|
| 1 day | £100 |
| 2 months | £200 |
| 6 months | £300 or 5% of the CIS deductions on the return, whichever is higher |
| 12 months | A further £300 or 5%, whichever is higher |
A small building contractor uses subcontract labour in summer and does its own work from November to February. Under the new rules those four months each need a nil return or an inactivity notification.
Suppose it files none of them and nothing is picked up until the following autumn — around ten months later. Four returns, each at least two months late and three of them more than six months late:
£2,100 of penalties on four months in which the business paid nobody and owed HMRC nothing at all. The tax at stake was zero. The penalty is for the paperwork.
You have 30 days from a penalty notice to appeal, and a genuine mistake in the first year of a changed obligation is the kind of thing appeals are for — but the cheaper answer is a recurring reminder on the 19th.
One line: the 19th is now a monthly event whether or not you paid anybody.
Practically, that means the CIS return moves from being something triggered by having paid subcontractors to being a fixed monthly task, like a VAT return or a payroll run. If you use bookkeeping software with a CIS module, check that it prompts for nil months rather than staying quiet when there is nothing to report — several do the latter, which was correct until April 2026 and is now the wrong behaviour.
The rest of the month's CIS dates are unchanged: payment and deduction statements to subcontractors by the 19th, and deductions paid to HMRC by the 22nd electronically or the 19th by post. All of them are on the CIS tax calendar, and CIS returns and verification covers how we run the monthly cycle for clients.
A new regulation 24ZA exempts payments to local authorities and public bodies from CIS — they are treated as holding gross payment status. If you subcontract to a council or a public body, that is a genuine reduction in work rather than an addition.
Together the two changes are a fair trade: one more filing a month in quiet periods, one fewer verification and deduction exercise where the payee is a public body. It is the first CIS package in some time that gives something back.
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From 6 April 2026, yes, if you are a mainstream contractor. Where no subcontractors were paid in a tax month you must file a nil return or notify HMRC of a period of inactivity, by the 19th of the month. The obligation had been removed in 2015 and has now been reinstated as part of the CIS simplification package amending regulation 4 of SI 2005/2045. Deemed contractors — businesses outside construction caught by the £3 million rolling twelve-month spend test — are not legally required to file nil, but HMRC will issue a penalty if they neither file nor notify, cancelling it only once they confirm nobody was paid.
The same as for any late CIS return, because the penalties are charged per return rather than per pound of tax: £100 at one day late, £200 at two months, then £300 or 5% of the deductions on that return at six months, whichever is higher, and a further £300 or 5% at twelve months. On a nil return there are no deductions, so the fixed amounts apply. Four forgotten quiet months picked up ten months later can therefore produce around £2,100 of penalties on tax of nil. You have 30 days from the penalty notice to appeal.
Because removing it did not achieve what it was meant to. HMRC's stated reason for reinstating the obligation is that removal did not reduce burdens and produced erroneous late-filing penalties. Without a nil return, HMRC's records could not tell the difference between a contractor who paid nobody in a month and a contractor who simply had not filed, so the system defaulted to treating quiet months as failures and issued penalties that then had to be appealed and cancelled. Filing a nil return takes a minute; getting an incorrect penalty withdrawn does not.
Yes, and it goes the other way. A new regulation 24ZA exempts payments to local authorities and public bodies from the scheme entirely — they are treated as holding gross payment status, so a contractor subcontracting to a council no longer needs to verify, deduct or report on those payments. That is a genuine reduction in work. Taken together, the package adds one filing a month during quiet periods and removes a whole verification and deduction exercise wherever the payee is a public body, which for contractors doing public sector work is a net improvement.
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