CIS question - Can a contractor offset tax suffered against tax due when paying sub-contractors

Ryan Mundy MAAT
Ryan Mundy MAAT MAAT, AAT Licensed Accountant Posts: 22 New contributor 🐸

A CIS sub-contractor who suffers a 20% deduction on his income.

Wants to take on two sub-contractors.

I understand that he would deduct 20% from their gross pay and pay this over to HMRC monthly.

Would he be able to offset the tax he has already suffered against the tax he has deducted from the subs before paying HMRC?

Is there any specific criteria to do this? He is a sole-trader.

Or could he apply to be paid gross?

Thanks in advance for your help.


  • RachaelHutcheon
    RachaelHutcheon Registered Posts: 1
    On a monthly basis you can calculate how much is due to HMRC by:

    CIS deducted from your customers £x
    Less CIS owed by you £x
    Amount due to/from HMRC £x

    You then need to submit an EPS to HMRC of CIS suffered YTD and you must continue to do this each month even if the figure does not change

    Hope this helps.
  • Geoff123
    Geoff123 Registered, Tutor Posts: 5
    Take a look at C I S 340 it can be downloaded from the HMRC site
  • KernowAccountant
    KernowAccountant Registered Posts: 103 💫 🐯 💫
    Not entirely sure what "RachaelHutcheon" means by: "CIS deducted from your customers", perhaps BY would make sense.

    In any case, the offset you propose may only be made by corporates. Sole traders gain a credit for CIS tax suffered via self-assessment. See COG909230.

    As for your final question, try googling...
  • Neillaw
    Neillaw MAAT, AAT Licensed Accountant Posts: 301 Dedicated contributor 🌟 🐵 🌟
    CIS tax can only be offset by Ltd company's.

    I've been recently dealing with a sole trader who had a liability of £6k but HMRC were holding onto £10k of his CIS tax.

    Luckily for him it was near to year end so accounts went in early and repayment was made against liability with some charges made for not paying on time.
  • Maria75
    Maria75 Registered Posts: 3
    The CIS tax is money which is from your clients subcontractor not from your client. Like VAT they are just administering the payment. The total amount paid out to any subcontractor for their services will reduce your clients gross profit by the same amount. You clients tax liability will be reduced because their profit is reduced.
  • bund
    bund Registered Posts: 1
    hello. i,v recently started up my own company, and am very curious about this cis offset. e.g what my main contractor pays hmrc for me, and what i must pay again for my employees. I have mentioned this to my accountant and he seems to think there is no offset option? my company is vat registered. sholud i just pay employees cis monthly to keep my out going high for expenses purposes? thanks
  • Geoff123
    Geoff123 Registered, Tutor Posts: 5
    Best thing to do is download CIS340 from HMRC website but basically you offset against any PAYE liability via your payroll.
  • Neillaw
    Neillaw MAAT, AAT Licensed Accountant Posts: 301 Dedicated contributor 🌟 🐵 🌟
    There is an offset but only if your a ltd company.
    You need to submit your form on a monthly basis, if your accountant isn't doing your wages then I'd look at moneysoft as this seems to be the best package for both CIS and general payroll if your doing both.
  • Geoff123
    Geoff123 Registered, Tutor Posts: 5
    If you are a one man Ltd company and not drawing a salary via PAYE (dividends instead) you may request that the CIS deductions be offset against Corporation Tax liability you must seek agreement with HMRC before this is allowed.
Privacy Policy