Keeping Records for CIS

If you’re a contractor or subcontractor, you’re likely to have some involvement with the Construction Industry Scheme (CIS). While it may seem straightforward when you look at the likes of CIS statements, there’s a heap of record-keeping behind the scenes!

Let’s explore the kind of records you should maintain, based on where you stand in the Construction Industry Scheme process.

What is CIS?

In a nutshell, the CIS (Construction Industry Scheme) means tax payments deducted from subcontractors’ gross pay by the contractor who hires them for construction work. The contractor sends these deductions to HMRC on behalf of the subcontractor as advance payments towards the subcontractor’s tax bill.

Then, when the subcontractor submits their Self Assessment tax return, some (or all) of it has already been paid)

It can feel a little similar to PAYE, as income tax is collected by the contractor before the subcontractor is paid – a bit like an employer does for employees when they pay their wages.

Who needs to pay CIS?

Subcontractors have CIS deductions taken from their payments by the contractor who hires them. The contractor reports these deductions to HMRC through monthly CIS returns, and pays the deductions on their behalf.

It’s mandatory for contractors to register for CIS, but optional for subcontractors, although deductions are made higher at a higher rate for subcontractors that aren’t registered. We go into this in much more detail in our CIS blog that discusses who is expected to register and how it works.

What CIS records do subcontractors need to keep?

The contractor you work for should give you a CIS statement every month. It will show how much you earned and how much was deducted for CIS. You’ll need to keep all of these statements as a reference for when you complete your Self Assessment at the end of the tax year.

HMRC use your return to check you’ve paid the right amount of tax, or if you’ve overpaid and need a refund or underpaid and owe them more.

There is a CIS figure box where you can enter the total CIS deductions taken from your gross pay throughout the tax year.

What is a CIS statement?

If you’re a subcontractor, the contractor/s you work for will give you a CIS statement as written proof of any tax deductions they’ve made. Like a payslip, it’ll include your gross pay, the deductions made, and your net pay (your pay after tax).

You can ask your contractor for a replacement copy of any missing CIS Statements but if they’ve stopped trading, or you simply can’t get in touch with them, you need to write to HMRC.

What records do I need to keep as a contractor for CIS?

In order to submit monthly CIS returns under the Construction Industry Scheme, you’ll need to keep records of:

There’s a lot of responsibility placed in the hands of a contractor. As well as ensuring you’ve taken CIS from subcontractors accurately, you need to keep HMRC up to date with all of the payments and let them know about any changes made to your business.

Keeping your financial reports up-to-date and accurate is crucial, and efficient bookkeeping software can ease the stress so you can keep everything in one place.

Using cloud-based bookkeeping software can make the process easier, and keep your records safe for as long as you need them!

Are there any penalties if I lose any CIS documentation?

If you’re a contractor, you could be asked by HMRC to provide your CIS records at any time. Failure to do so could result in you being fined up to £3,000.

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