Written by Sarah Lockwood
5 Benefits Of Using Xero For CIS!
Are you lost in the world of the Construction Industry Scheme and have no idea where to turn to for help?
There are many accounting software currently on the market that can be useful for producing and submitting CIS information and returns.
The Software we recommend to our clients at Northern Accountants is Xero!
Why is Xero so good?
Because we believe it’s the most comprehensive accounting software that makes submitting CIS information, tracking payments, filing invoices and tax returns to the HMRC a breeze.
Easy And Efficient To Use!
One of the main benefits of using Xero to prepare and submit CIS information to HMRC is that it is simple and straightforward. It can also be completed alongside your day-to-day bookkeeping.
CIS transactions can be easily reconciled in the bank. They will also be sent to the correct nominal codes, which will later calculate the figures needed to be sent to HMRC for every period.
Xero also gives you the clear visibility needed of previous and upcoming submissions. This ensures that you keep on top of your tax affairs.
Subcontractor Verification
Another benefit is that you can verify your subcontractors through Xero, rather than the HMRC website.
The information needed to do this is the trading name and UTR number. All information required is clearly set out on the Xero contact template if CIS registered.
Using Xero to verify subcontractors means that you instantly know how much CIS tax is to be deducted from the source when making payments.
Xero advises whether your subcontractors are registered for CIS or not. You can also check this using the HMRC website by logging in.
Automatic CIS Tax Calculation
Verifying your subcontractor through Xero makes it easier to calculate the CIS tax that needs to be deducted.
Your subcontractor will need either 30%, 20% or 0% deducted. For example;
- 30% means that they have not yet registered or verified themselves under the CIS scheme.
- 20% means that they have verified themselves and are standard rated.
- 0% on the other hand, means that the subcontractor has registered as Gross Status. This means no tax should be deducted at source. Leaving the gross amount of the invoice to be paid directly to them.
The CIS deduction is automatically calculated when you create an invoice for the subcontractor.
The nominal you need to use in Xero to ensure the CIS tax is taken off is ‘CIS Labour Expense’. This will then calculate the final amount. The final total of the bill is the amount that you need to pay your subcontractor.
CIS Return Submission Through Xero
If all of your subcontractors are verified through Xero, then you are able to submit your CIS return through Xero.
Add together the CIS deductions calculated on each subcontractor invoice.This calculation generates a figure that you need to submit to HMRC.
Xero calculates your CIS deductions automatically and determines the amount to report to HMRC each period.
All you need to be able to submit your CIS return through Xero are your HMRC logins.
For more information on using Xero to manage your CIS, contact our offices for help. Alternatively, use the following link to read more on Xero’s website About Construction Industry Scheme (CIS) in Xero
Electronic Downloads Of CIS Statements
A final benefit of using Xero for CIS is that you can download your subcontractor’s deduction statements electronically. You can easily access this feature in the reporting tab, making it simple to use.
You can download them as PDF documents. This allows you to easily send the documents to your subcontractors, enabling them to view and file the information as needed.
Xero can also ensure that you have accessibility to previous and current records in relation to CIS. This is beneficial since subcontractors or HMRC may request copies directly at any time.
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