CIS -?

ChloeHowlett0103

Good evening all,

I am just after some information on Construction industry scheme please if anyone could share some knowledge / experience?
Long story short, my husband is going self employed mid next year and he will fall under this scheme as over time will be using subcontractors too to help out with bigger jobs.
I am fully AAT trained and work
In finance so makes complete sense for me to do his books. However I have very little
Knowledge about this scheme so want to know what it’s all about before it comes to him being self employed so I can get organised.
I am assuming he needs to register as a contractor and anyone who does work for him will need to be a subcontractor. How is this done? Also how do we pay them? I believe it’s all taxed at source? I guess this could be done manually but is there a software that could help with this?
Any information given , will be hugely appreciated.
Thanks

TaxAdvisorWB

Hello Chloe, CIS can be straightforward at times but then other times is can catch anyone out. As an aside I would recommend an amazing book on CIS from Claritax (I have no connection with them but the coverage is amazing and the information will no doubt help avoid potentially costly mistakes).

You are right, your husband will need to register as a contractor and file monthly contractor returns. This can be done through HMRC.GOV.UK or a paid for 3rd party software. The returns will need to be filed each month, even where no subcontractors are paid a nil return is required. Failing to make these submissions can result in substantial fines.

When registering as a contractor it is managed through the PAYE system. Be sure to select CIS only registration to avoid complications with PAYE filing obligations.

Each new subcontractor your husband engages will need to be verified with HMRC. They will then confirm if they should be paid gross, under deductions at 20% or 30% in some cases.

The deductions should then be paid over to HMRC promptly. Return periods run from the 6th - 5th of following month and payment is due by 22nd of the month when paying electronically.

Careful attention should be given to materials as CIS should only be deducted on the labor element. However this is a prime example of CIS not being as straightforward as all that. If the subcontractor makes a markup on the materials CIS would come into play on this.

Like I say I cannot recommend Claritax book on CIS enough, it will highlight so many areas of potential risk and pitfalls and help you maintain compliance.

For software submitting through HMRC.GOV.UK is easy enough and if only handling a few subcontractors is perfectly manageable. If you will have a large number of subcontractors a 3rd party software will make it easier to track and run off deduction statements much quicker and with more consistency. Personally I use BrightPay. Works very well and is good value for money.

I hope this has helped and the new venture works out well.

ChloeHowlett0103

Hello, thank you so much for all that information. That has been so helpful & that all makes complete sense. I will be sure to invest in that book too.
To start I might just try submitting through HMRC for contributions as don’t think it will be many to pay with.
I currently use brightpay at my day job and agree it is super user friendly so will end up using that payroll software if it comes to it.
Thanks again for your help , I really appreciate it.