The Construction Industry Scheme (CIS) is in place to tackle tax avoidance within the construction sector, and means contractors must make deductions from their subcontractors’ pay – also known as ‘advance payments’ towards their tax bill.
With this requirement comes good record-keeping, as well as monthly CIS returns to tell HMRC how much you’re paying your subcontractors, and what deductions you’ve made. We’ll look at what a CIS return is, and how you can submit yours.
What is a CIS return?
If you’re a contractor working in the construction industry and using subcontractors, you’ll need to register for the Construction Industry Scheme (CIS), and complete monthly CIS returns to tell HMRC how many subcontractors you have, how much they’ve earned, and how much you’ve deducted from their pay for tax.
How much do I need to deduct from my subcontractors’ pay?
This depends on whether or not they’re registered for CIS, or whether they have gross payment status.
- If they are not registered for CIS, you need to deduct 30%
- For subcontractors who are registered for CIS, you’ll deduct 20%
- If any subcontractors have gross payment status, you’ll deduct 0%
How do I verify a subcontractor’s status?
You can head over to the GOV website to verify a subcontractor’s status. You’ll need the subcontractor’s UTR number, along with the following information depending on their business structure:
|Business type:||The information you need to verify their subcontractors status:|
|Sole trader||National Insurance Number|
|Limited company||Company name, company registration number & company UTR number|
|Partnership||The name of the nominated partners, the partnerships’ trading name, and the partnership’s UTR number|
Who needs to send a CIS return?
Contractors who have subcontractors working under them in the construction industry must send CIS returns, and ensure they keep detailed financial records about the payments and deductions they make so they can report this information correctly.
What is the CIS reporting deadline for contractors?
You need to ensure you send your CIS return by the 19th of each month. Each tax month starts on the 6th and ends on the 5th of the following month.
You’ll still need to submit a return even if you don’t use any subcontractors one month – otherwise HMRC will just assume you’ve missed the reporting deadline! If you have stopped using subcontractors completely (or for the foreseeable future), you can deregister for CIS.
How do I register for CIS as a contractor?
You can register as a contractor online. You need to have on hand:
- Your National Insurance number
- UTR number
- VAT number (if you’re VAT registered)
- Details of each subcontractor you work with
What records do contractors need to keep for CIS?
As a contractor, you need to ensure you always keep detailed records, of everything that goes on in your business so you can include accurate information on your CIS returns. It’s best practice to keep a record of the following:
- Any deductions made from subcontractors’ payments (as well as the dates they were deducted)
- The gross amount the subcontractor invoiced
- The costs of materials subcontractors have invoiced you (also excluding VAT)
- Each subcontractor you work with – such as their UTR number
How do I submit my CIS return?
Is there anything I need to do after I’ve sent my CIS return?
As well as ensuring you’ve recorded everything, you’ll also need to give your subcontractors a CIS statement. This is similar to a payslip, showing the gross pay, how much has been deducted, and the net pay.
You only need to provide this to contractors whom you deduct CIS payments from. If they feel they’re paying too much tax, they can submit their Self Assessment tax returns earlier, so any overpayments can be refunded back to them sooner.
If you’re a contractor, you need to keep all your financial records in one place! Sign up today for your free Pandle account and see how we can help you.