If you are a CIS contractor and you paid no subcontractors last month, you might assume there is nothing to send HMRC. From 6 April 2026, that assumption can cost you £100.
The rules changed. The obligation to file a nil monthly return, which HMRC scrapped back in 2015, is back in force for the 2026/27 tax year. If you have an open contractor scheme and you make no payments in a month, you now have to either file a nil return or formally tell HMRC your scheme is inactive. Do neither, and the late filing penalty regime kicks in.
This guide explains exactly what the nil CIS return penalty is, who the change affects, how to stay penalty-free, and the cheapest way to handle a quiet month. It is written for contractors registered under the Construction Industry Scheme. If you would rather hand the monthly filing over entirely, that is what we do for CIS contractors.
Do you still need to file a nil CIS return?
Yes. From 6 April 2026, if you have an active CIS contractor scheme and you make no payments to subcontractors in a tax month, you must either file a nil return or tell HMRC your scheme is inactive. If you do neither, HMRC will charge a £100 fixed penalty the day after the 19th. Filing the nil return online takes a couple of minutes and avoids the fine entirely.
What is a nil CIS return and what changed in April 2026?
Under the Construction Industry Scheme, every contractor files a monthly return (the CIS300) covering each tax month, which runs from the 6th of one month to the 5th of the next. The return has to reach HMRC by the 19th of the month in which the return period ends.
A nil return is simply that monthly return showing your payments to subcontractors were zero. You still file, you just declare nothing was paid.
Here is the history that trips people up. The duty to file a nil return was removed in 2015. For roughly a decade, if you paid no subcontractors in a month, you could simply not file and face no penalty. Many contractors got used to that.
From 6 April 2026 that has been reversed. HMRC reinstated the obligation because dropping it did not actually reduce the admin burden and led to a stream of incorrect late filing penalties that then had to be cancelled. So for the 2026/27 tax year onwards, a month with no payments is no longer a month you can ignore. You either file the nil return or you put the scheme into inactivity.
What is the penalty for a missed nil CIS return?
Miss the 19th and HMRC charges an automatic fixed penalty. The CIS late filing penalty structure is the same whether the return is a normal one or a nil one:
| How late the return is | Penalty |
|---|---|
| 1 day late | £100 fixed |
| 2 months late | A further £200 fixed |
| 6 months late | £300, or 5% of the CIS deductions on the return, whichever is higher |
| 12 months late | A further £300 or 5%, rising to £1,500 or £3,000 in serious cases |
For a genuine nil return there are no deductions to apply the 5% to, so the bite at 6 and 12 months is the fixed £300 floor. But the £100 hits straight away, and a missed nil return that drifts can still reach £300 or more before you notice.
Two points worth knowing:
First, there is a cap for brand-new contractors. When you file your very first CIS return, having never filed one before, HMRC caps the total of the £100 and £200 fixed penalties for that first and any earlier outstanding returns at £3,000. That protects someone who registers late and discovers a backlog, but it does not make the penalties disappear.
Second, HMRC will not charge a penalty if you had a reasonable excuse for filing late, provided you then file without unreasonable delay once the excuse ends. A reasonable excuse is a genuine event that stopped you meeting the deadline despite taking reasonable care, not simply forgetting or finding it inconvenient.
If you do get a penalty you think is wrong, you have 30 days from the date on the penalty notice to appeal, online or in writing.
Nil return or inactivity request: which should you use?
You have two ways to stay penalty-free in a month with no subcontractor payments. Pick based on how long the quiet patch will last.
File a nil return when you have just had one isolated month with no payments but expect to pay subcontractors again soon. It is the right tool for a one-off gap.
Make an inactivity request when you know you will not be paying any subcontractors for a stretch of months. You tell HMRC and they set your CIS scheme to inactive for up to 6 months, so you do not have to file monthly nil returns across that whole window. If the quiet period runs on, you can set another 6-month inactivity period when the first ends.
The practical rule of thumb we use: a single quiet month means file the nil return; a known multi-month lull means request inactivity so you are not chasing the 19th every single month.
One trap to avoid. An inactivity request is not "set and forget". If you start paying subcontractors again before the inactive period is up, the obligation to file the normal monthly return snaps straight back. Mark the restart date so you do not sail past a 19th and pick up a £100 penalty on a live return.
Who does the April 2026 change affect?
The reinstated nil return duty applies to mainstream contractors: businesses in the construction industry that pay subcontractors and have an open CIS scheme. If that is you and you have months with no payments, this change is directly relevant.
Deemed contractors, meaning non-construction businesses pulled into CIS because their spend on construction operations crosses the threshold, are not under the same legal obligation to file nil returns. HMRC may still issue a penalty if it is expecting a return and none arrives, but those can be cancelled once you confirm there were no payments. Even so, telling HMRC about a period of inactivity keeps things tidy and avoids the back-and-forth.
If you have stopped using subcontractors permanently, the cleaner move is to close the CIS scheme rather than leave it open and file nil returns indefinitely. An open scheme with no activity is exactly what generates avoidable penalties. We sort this out as part of looking after construction businesses and their monthly compliance.
How the wider April 2026 CIS reforms fit in
The nil return change is one part of a broader CIS tidy-up landing in the 2026/27 tax year, so it helps to see it in context.
From 6 April 2026, payments made to local authorities and certain public bodies are taken outside the scope of CIS, so contractors no longer apply CIS deductions to those payments.
Separately, and often confused with the 2026 changes, VAT compliance was added to the gross payment status (GPS) test back on 6 April 2024. Since then, HMRC also weighs how you have met your VAT filing and payment obligations when deciding whether to grant or keep GPS, alongside the existing PAYE, Income Tax and Corporation Tax checks. HMRC can cancel GPS immediately where it has reasonable grounds to suspect serious fraud relating to VAT, PAYE, Income Tax Self Assessment or Corporation Tax. Minor or one-off VAT slips are not meant to cost you your status; the test targets severe and repeated non-compliance.
The standard CIS deduction rates are unchanged: 20% for registered subcontractors, 30% for those not registered, and 0% where the subcontractor holds gross payment status. None of that changes your nil return duty. The point of mentioning it is that 2026 is an active year for CIS, and missing the small nil filing duty while focusing on the bigger headlines is an easy way to pick up an avoidable £100.
Illustrative example: a contractor with a quiet winter
Illustrative example. Imagine Daniel runs a small groundworks company registered as a CIS contractor. He pays subcontractors through the busy months but the work dries up over winter, and he pays no subcontractors at all in December and January.
Under the old pre-2026 rules he would have filed nothing for those two months and faced no penalty. For 2026/27, the nil return duty is back, so doing nothing is no longer safe.
If Daniel forgets both months, here is what HMRC charges, assuming he files each only after the 19th has passed:
| Return month | Action taken | Penalty |
|---|---|---|
| December (due 19 January) | Missed | £100 |
| January (due 19 February) | Missed | £100 |
| Total | £200 |
Two minutes of filing per month would have cost him nothing. Two forgotten nil returns cost £200, and that figure only grows if they slide past the two-month mark and pick up the further £200 each.
The smarter route, knowing in November that he will not pay anyone over winter, is to make a single inactivity request covering the quiet stretch. HMRC sets the scheme inactive for up to 6 months, Daniel files no monthly returns across that window, and there is no penalty exposure at all.
These figures are illustrative. Your own position depends on your scheme status, the months involved and whether you file on time.
Frequently asked questions
Do I have to file a nil CIS return if I paid no subcontractors?
From 6 April 2026, yes, if you have an active CIS contractor scheme. In any tax month where you pay no subcontractors you must either file a nil return or notify HMRC that your scheme is inactive. If you do neither, HMRC charges a £100 fixed penalty.
What is the penalty for a late nil CIS return?
A late return, including a nil return, triggers an automatic £100 penalty the day after the 19th filing deadline. A further £200 applies at two months late, then £300 or 5% of any deductions at six months, with more at twelve months. For a genuine nil return the tax-geared amounts default to the £300 fixed floor.
What is the difference between a nil return and an inactivity request?
A nil return is a monthly CIS return declaring zero payments, used for an isolated quiet month. An inactivity request tells HMRC you will not be paying subcontractors for a while, and HMRC then sets your scheme inactive for up to 6 months so you do not have to file monthly nil returns across that period.
How long does a CIS inactivity request last?
HMRC can set your CIS scheme to inactive for up to 6 months at a time. If the quiet period continues, you can request a further 6-month period. If you start paying subcontractors again before it ends, your normal monthly filing duty resumes immediately.
Did the nil CIS return rule change in 2025 or 2026?
The duty to file nil returns was removed in 2015 and reinstated from 6 April 2026. So for the 2026/27 tax year onwards, a month with no subcontractor payments once again requires either a nil return or an inactivity notification.
Can I appeal a nil CIS return penalty?
Yes. You have 30 days from the date on the penalty notice to appeal, online or in writing. HMRC will not charge a penalty where you had a reasonable excuse, provided you file without unreasonable delay once that excuse ends.
If you would rather never think about the 19th again, we file CIS monthly returns, nil returns and inactivity notifications for contractors as a routine part of their monthly bookkeeping. Book a free call with a Zmartly accountant and we will make sure your CIS filing is watertight for 2026/27.
