By Sarah Lockwood
Do you work within the Construction Industry? If so, Northern Accountants can help your business as we’re accountants who are specialised in CIS related tax and business support, based in Leeds, West Yorkshire.
For starters, what information do you need to know?
As a subcontractor, being CIS registered can increase cashflow and benefit you in many other ways, as the tax is deducted at source. Meaning, it is already paid on your behalf by the contractor.
The deductions are seen as advance payments towards the subcontractor’s tax and National Insurance that will be owed at the end of the tax year.
This avoids a one-off balloon payment being due at the end of each year. It also means that you only have the remaining balance to settle, if any.
If you are a contractor, you must be registered under CIS. You are seen as a contractor if you pay subcontractors for labour that relates to construction work.
Here at Northern Accountants, we have a specialist team who are CIS accounting experts. If you need help with your accounts or business support, contact our office or continue reading to learn more.Northern Accountants
Table of contents:
- What Is CIS?
- When, And How Often To Submit Your CIS?
- Does Your CIS Affect Your PAYE Due?
- Do You Have To Be Registered For CIS?
- What Next?
What Is CIS?
CIS stands for Construction Industry Scheme. Under the scheme, there are contractors and subcontractors.
Contractors deduct a portion of the money from a subcontractor payment to then pay to HMRC. This can be deducted at 0%, 20%, and 30% depending on the sub-contractor.
The way to find out how much CIS tax you need to deduct from each subcontractor, is by verifying them through the HMRC website or your preferred accounting software.
To be able to verify a subcontractor, the minimum information required is their trading name & their UTR in which they verified themselves with HMRC.
- 0% deduction means the subcontractor is registered as Gross Status, where contractors aren’t allowed to deduct CIS tax from them.
- 20% deduction means the subcontractor is registered at the standard deduction rate per HMRC.
- 30% deductions mean the subcontractor has not yet verified themselves with HMRC, and so they aren’t recognised and are seen as an unknown subcontractor within the Construction Industry Scheme.
CIS deductible means you are a contractor and must pay the tax element that you have deducted for the payment to the sub-contractor.
CIS Suffered means you are the sub-contractor and you have received a payment net of any deductions.
When, And How Often To Submit Your CIS?
CIS submissions are to be sent to HMRC monthly.
CIS returns for CIS stopped and EPS submissions for CIS suffered are due to HMRC by the 19th of every month.
The period you are reporting for will be the 6th of the month to the 5th of the next month.
For example, if you are reporting CIS figures for the period 6th of April to the 5th of May, this will be due to be submitted and any payment will be due by the 19th of May.
Does Your CIS Affect Your PAYE Due?
Your CIS doesn’t directly affect your PAYE. However, it does affect how much you pay.
If you stop CIS from your subcontractors, this amount is due to be paid back to HMRC every month, so this can be added to your PAYE figure that is already due.
Also, if you suffer CIS, the amount suffered for the month can be deducted from your original PAYE amount due for the related month.
Lastly, if you are a contractor and a subcontractor, which means you stop and suffer CIS, then you can add your stopped figure to your PAYE figure, and then deduct how much CIS that you have suffered for the period and this is the amount that will be due.
Sometimes, if you suffer more than the total of your CIS stopped plus your PAYE, then you will be in credit for the related period and then will have nothing due to pay. More info in regards to paying CIS or PAYE can be found with HMRC: www.gov.uk/pay-paye-tax
Do You Have To Be Registered For CIS?
The simple answer is if you are a contractor then yes you do have to be registered under the CIS scheme but if you are a subcontractor then you do not. However, this is when you will have 30% deductible from the payment you are owed.
You also do not have to be registered under the CIS scheme if you are not related to the construction industry.
More info about this can be found on the gov website: www.gov.uk/what-is-the-construction-industry-scheme
I hope that this article has helped you to understand the steps you need to take to become CIS registered, and all the steps in between. Whether it be as a contractor or subcontractor.
If you need any further help on how to register for CIS, or you’re looking for a CIS accountant who knows your industry inside out, please contact us at Northern Accountants as we’ll be happy to help.