The construction industry scheme (CIS) can be a bit of a headache to manoeuvre, but making sure you’re paying HMRC the right amount of tax is important, especially if you want to avoid any penalties.
There are systems and software out there to make CIS payments easier. Here’s what you need to know.
Complications of CIS
CIS was introduced as a way of curtailing tax evasion in the construction industry, which is much more common given the reliance on cash payments in the sector.
The CIS applies to all payments for labour made by a contractor to a subcontractor. The deducted money then goes to HMRC as the subcontractor’s advance payment of their tax and National Insurance.
Contractors must register for CIS but subcontractors do not, although if subcontractors don’t register they will have to pay 30% instead of 20%.
With all of the deductions and paperwork to fill out, you may even miss out on reclaiming some tax from HMRC if it’s not kept on top of.
What is CIS-compatible software?
Nowadays you’ll find most accounting software will be ready for CIS deductions and calculations.
QuickBooks, Xero and Sage are just three examples of software that can link with HMRC and make the deduction and payments online.
Much like Making Tax Digital (MTD), doing CIS online much easier, as it is all stored safely and accessible from anywhere you find yourself if you have a mobile device on you.
There is a full list of CIS-compatible software available on the Government website.
How can software help?
With CIS software, you’ll save youself time. Instead of endless calculations at different rates (depending on whether the subcontractors are CIS-registered), the software will do it all for you once you have filled in the bare essentials.
One of the first steps of CIS accounting is verifying the subcontractors, but any CIS-compliant software will already be linked to the CIS database meaning less legwork.
Digitising your processes will cut down on your paperwork as everything will be filed and submitted on the app. Even your subcontractors payslips will be emailed to them at the click of a button.
This will also take into account your hourly and daily rates as well as weekly, fortnightly and monthly pay schedules. It will also take potential deductions or retentions into account.
By using compatible software, you can track all your invoices from subcontractors, complete and submit your monthly CIS returns and create subcontractor payment and deduction statements automatically.
With the software linked directly to HMRC, you won’t need to worry about searching through pages and pages of documents to find what you need to fill out your returns.
You’ll also be able to take advantage of claiming back any overpaid CIS tax payments made throughout the year.
Make the switch
With as labour-intensive job as construction, there’s little need to worry yourself with the extra calculations with CIS.
By making the most of your CIS software and the helping hand of an accountant, you can make light work of your payroll and returns.
Contact Mayflower today to discuss CIS payments.