There are quite a few clients who struggle to understand the concept of how CIS works because letโs be honestโฆ itโs a little complicated.
Please continue to read as we saw some helpful information that we have listed below that makes it all a little more easier to understand โญ๏ธ
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โ ๐๐๐๐๐จ๐ฉ๐๐ง ๐๐ค๐ง ๐พ๐๐ – if you are already registered as self employed, log into your online self assessment account to register for CIS. If you are not, there is an option to select ‘working as a subcontractor’ when you register as self employed. It is very important you register for CIS, or you may pay the wrong amount of tax. If you are a limited company, you can fill out a form online to register.
โ ๐๐ช๐๐ข๐๐ฉ ๐ฎ๐ค๐ช๐ง ๐๐ฃ๐ซ๐ค๐๐๐ – When you have registered for CIS, and have a contractor to work for, make sure to give them your trading name and UTR number so they can deduct the correct amount of tax from your invoices. Remember that it is only labour that CIS is deducted from – VAT and materials do not have CIS Deducted.
โ ๐๐๐๐ฅ ๐ฎ๐ค๐ช๐ง ๐ง๐๐๐ค๐ง๐๐จ – After the contractors pay you for your invoice, minus the CIS deduction, they will provide you with a payment and deduction certificate. Make sure to keep hold of this, as you will need it to for your tax information. You will also need to keep hold of receipts for materials.
โ ๐๐๐ฎ ๐ฎ๐ค๐ช๐ง ๐ฉ๐๐ญ๐๐จ – If you are a sole trader, at the end of the tax year you need to complete your self assessment. Include the full amounts of your invoices as income, and input the CIS tax deducted into the relevant box. If you are a limited company you will need to record your CIS deductions on a monthly basis, unless you have gross status, in which case you can declare this on your corporation tax return.
โ ๐๐ค๐ฉ๐ ๐๐ค๐ง ๐ก๐๐ข๐๐ฉ๐๐ ๐๐ค๐ข๐ฅ๐๐ฃ๐๐๐จ – Unless you have gross status, you will need to record your CIS deductions through a payroll scheme. This will involve submitting an EPS before 19th of each month, relating to the prior tax month. It is advisable to seek professional advice for help with this.
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โ ๐๐๐๐๐จ๐ฉ๐๐ง ๐๐ค๐ง ๐พ๐๐ – If you are a construction company who is planning on using subcontractors (self employed individuals) to carry out work for your business, you need to register for CIS. You will need to register as an employer, and also as a contractor. You need to check if you should employ the person or if you can work with them as a subcontractor – the HMRC website has useful help on this.
โ ๐๐๐ง๐๐๐ฎ ๐๐ช๐๐๐ค๐ฃ๐ฉ๐ง๐๐๐ฉ๐ค๐ง๐จ – Before you pay any subcontractors, you need to verify them through HMRC. You can either do this through your payroll software, with HMRC’s online system, or over the phone. HMRC will tell you what deduction you must make from your subcontractors invoice.
โ ๐๐๐ก๐ ๐ ๐ง๐๐ฉ๐ช๐ง๐ฃ – After you have paid your subcontractor’s invoice, minus the CIS deduction, you will need to submit a CIS return to HMRC, which can be done through HMRCs online service or payroll software. You must submit this by the 19th of the month following the tax month you made the payment in. You must also provide the subcontractor with a payment and deduction certificate by this date.
โ ๐๐๐ฎ ๐พ๐๐ ๐ฉ๐ค ๐๐๐๐พ – If you also have employees, you need yo pay HMRC as part of your normal PAYE/NI Payment. If not, you need to pay all the CIS you have deducted from your subcontractors to HMRC by the 22nd of each month to avoid penalties.
โ ๐๐ค๐ฉ๐ – You need to keep records of all payments made to subcontractors for three years afterwards.