By Sarah Lockwood

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.

Table of contents:

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 straight forward. 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 with the following link: www.gov.co.uk/paye-online/

Automatic CIS Tax Calculation

Calculator and paper showing the Xero allows for Automatic CIS Tax Calculation

Once you have verified your subcontractor through Xero, it will then be easier to calculate the CIS tax that needs to be deducted from your subcontractor.

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 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.

The CIS deducted, which is calculated on each subcontractor invoice is added together. This then leaves a figure that needs to be submitted to HMRC.

As your CIS deductions are automatically worked out by Xero, it also calculates the amount that needs to be reported to HRMC every 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. This feature can be found in the reporting tab, which is simple and easy to do.

They can be downloaded as PDF documents. This means they can be sent out to your subcontractors so they can easily view, and file the documents as needed.

Xero can also ensure that you have accessibility to previous and current records in relation to CIS. This is beneficial, as for any reason, copies may be requested directly from the subcontractor or HMRC.

What Next?

In conclusion, I hope you found this article useful, and that you took away everything you needed to known about using Xero for CIS.

If you get stuck when using Xero in order to prepare CIS information for yourself, your subcontractors, or most importantly, HMRC – please feel free to get in touch.

If you need more information on either the Construction Industry Scheme, using Xero or any of your tax or business-related questions – contact us at Northern Accountants, we’re always happy to help.