CIS is monthly, and it is unforgiving.
Verify the subcontractor before you pay them. Deduct at the correct rate. Get the return in by the 19th. Send every subcontractor their payment and deduction statement. Then do the whole thing again next month, and the month after that, whether or not you spent the last fortnight on site.
In most firms this job lands on whoever has the least time for it. The owner on a Sunday evening, or an office manager who picked it up because nobody else would. It runs on a spreadsheet that one person understands. The first sign that anything has gone wrong is a letter from HMRC.
We run it for you instead.
The background on how the scheme works is covered elsewhere on the site. This page is about handing the monthly job over.
Where it usually goes wrong
Paying before verifying. Verification tells you what rate applies to that subcontractor. Pay first and check afterwards and you have already deducted the wrong amount, which is your problem to fix rather than theirs.
The rate applied from memory. Subcontractor status changes. Someone who was on one rate last year may not be on it now, and the only way to know is to check with HMRC rather than assume.
Materials caught in the deduction. The deduction bites on the labour element. Where a subcontractor has bought materials and shown them on the invoice, deducting across the whole figure takes money off them that was never due, and they will notice.
Nil returns forgotten. A month in which you paid no subcontractors still has to be reported. Firms with seasonal work miss these and pick up penalties for a month in which nothing happened.
Statements never issued. Your subcontractors need them to reclaim what has been taken off. Missing statements turn into chasing phone calls, which land back on the same person who was already short of time.
Nothing set up in the software. Xero handles CIS properly once it is configured properly. Most of the firms we take on have it switched off and are doing the sums by hand every month.
What is included
- Subcontractor verification with HMRC before first payment, and re-verification when it is due
- Deduction calculated on each invoice, with materials separated out
- Monthly CIS return prepared and filed
- Payment and deduction statements issued to every subcontractor
- Year end reconciliation, so the CIS deducted and CIS suffered figures agree with your accounts and with your HMRC record
- Gross payment status applications, and help holding onto it once you have it
- Dealing with HMRC directly on penalties and compliance checks, and on anything else they write to you about
- CIS set up inside your accounting software, so the calculation happens where the invoice is entered and stops being a manual job
How it works
- First call. We go through how you are running CIS now and what has already gone wrong.
- We look at the returns and statements already filed. If there are errors behind you, we tell you before we take anything on.
- We set CIS up inside your accounting software and load your subcontractor records into it.
- From then on you tell us who you are paying and what for. We verify, calculate, file, and issue the statements.
- Each month you get the return and the statements, plus a figure for what has been deducted from you and what you can set off.
- At year end we reconcile the scheme and handle any HMRC queries in your name.
Who this is for
UK construction limited companies turning over between £500,000 and £5 million that pay subcontractors most months, anywhere in the UK. Contractors, and firms that are contractor and subcontractor at the same time.
It is not for you if you pay one subcontractor twice a year and are content doing that yourself. It is also not for you if you want returns filed from figures you have already worked out and would rather we did not question. We check them, which occasionally means telling you the last few months were wrong.
Common questions
Can you take over part way through the year?
Yes. We would rather look at the returns already filed first, because errors are cheaper to correct than to be found.
What if previous returns were wrong?
They can be amended. We work out what was filed, what the effect is, and deal with HMRC on it. Putting your hand up before HMRC finds it is always the better position.
Do you deal with HMRC directly?
Yes. We are appointed as your agent and handle the correspondence, including penalty appeals and compliance checks.
Can you help us apply for gross payment status?
We prepare and submit the application, and tell you beforehand whether we think you will pass. Keeping it matters as much as getting it, because HMRC reviews it.
Do we have to use particular software?
We work on cloud accounting, and CIS is one of the reasons why. Running this on a spreadsheet is possible and slow.
Book a call. Send your last three CIS returns over first and we will tell you on the call whether they are right, before you commit to anything.
Common questions
Do you file the monthly CIS returns for me?
Yes. We verify new subcontractors with HMRC, work out the deduction for each payment, file the return before the 19th and issue the deduction statements. You send us the payments you have made and we do the rest. If returns are already late we file what is outstanding and deal with HMRC on the penalties.
What happens if a subcontractor was never verified?
You deduct at 30% rather than 20%, and if you got it wrong the shortfall is yours to pay, not theirs. HMRC comes to the contractor for it. That is the single most expensive CIS mistake we see, and it is entirely avoidable with a verification step before the first payment.