CIS and Construction Accounting in Walton-on-Thames

• Monthly CIS returns for contractors
• Checking (verifying) new subcontractors with HMRC
• Working out CIS deductions and preparing payment and deduction statements
• Self Assessment tax returns for subcontractors, including CIS deductions
• Bookkeeping that records CIS deductions and reverse charge VAT correctly

If you are a contractor

You are a contractor if your business pays subcontractors for construction work. GOV.UK explains who counts as a contractor, including businesses outside construction that spend a lot on building work.

As a contractor you need to:

• Verify subcontractors. Check each new subcontractor with HMRC before you pay them. HMRC tells you which deduction rate to use: 20% for registered subcontractors, 30% for unregistered ones, or no deduction if they have gross payment status. See how to verify subcontractors.
• Make deductions. Take off VAT, materials the subcontractor paid for and certain other costs, such as plant hire, then apply the rate to what is left. See making deductions and paying subcontractors.
• Give statements. Send each subcontractor a payment and deduction statement for every tax month in which you took deductions.
• File monthly returns. Send HMRC a CIS return by the 19th of each month, covering the tax month that ended on the 5th. If you paid no subcontractors, you still need to file a nil return or tell HMRC you are inactive.
• Pay HMRC. Pay the deductions to HMRC, usually monthly. If you also have employees, HMRC combines this with your PAYE payment.

HMRC charges penalties for late CIS returns, so a regular monthly routine matters.

If you are a subcontractor

If a contractor takes CIS deductions from your pay, that money is an advance payment towards your tax and National Insurance.

• Sole traders and partners include their total pay and CIS deductions on their Self Assessment tax return. HMRC subtracts the deductions from the tax bill. If too much has been deducted, HMRC repays the difference.
• Limited companies claim CIS deductions back through payroll, by setting them against the PAYE the company owes.

Keep every payment and deduction statement your contractors send you. They show what has already been paid on your behalf. GOV.UK explains how to pay tax and claim back deductions.

VAT and the domestic reverse charge

Since 1 March 2021, many building and construction services supplied between VAT-registered businesses, where the payment is reported under CIS, have been covered by the VAT domestic reverse charge. The supplier does not charge VAT on the invoice, and the customer accounts for it on their own VAT return instead. It does not apply where the customer is an end user or intermediary and has told the supplier so in writing. Our VAT returns page and our article on VAT records explain more.

What we need from you

Contractors: your employer PAYE and Accounts Office references, your subcontractors’ details (name, UTR, National Insurance or company number) and their invoices for each month.

Subcontractors: your UTR, all payment and deduction statements for the tax year, and records of your business income and expenses.

Frequently asked questions

What does a CIS accountant do?

A CIS accountant helps contractors meet their monthly CIS duties and helps subcontractors account for their deductions on their tax return.

Can I get a CIS tax refund?

Possibly. If the deductions taken during the year are more than the tax and National Insurance you owe, HMRC repays the difference once your return is processed.

Do I need to register as a contractor and a subcontractor?

If your business both pays subcontractors and works as a subcontractor, you need to register for CIS as both.

Talk to us about CIS

Tell us whether you are a contractor, a subcontractor or both. Get in touch or call 07979 418977, Monday to Friday, 9am to 5pm.