CIS subcontractors still need to pay tax and claim back deductions for accounting purposes. Check your duties as a sole trader, partner, or limited company and how to trace missing CIS statements.
There are tax responsibilities to fulfill after registering as a subcontractor with the Construction Industry Scheme (CIS).
You would still be responsible for paying the correct amount taxation and National Insurance contributions for your business.
CIS contractors can make payments to subcontractors in full if a deduction is not required. But, in most cases they will need to calculate the deduction before paying the subcontractor.
Paying tax and claiming back deductions still applies even if a contractor subtracted the amounts throughout the year.
As a subcontractor, you should get a monthly statement from any contractors that you do work for. A statement shows how much they paid you and how much they deducted from your pay. You will need this information to be able to complete your accounting procedures.
As the sole proprietor, you will be sending in your Self Assessment tax return at the end of the year to HMRC. But, besides the usual information, you should also record:
From that information, HMRC will then work out the bill for tax and National Insurance. They will also subtract any amounts already deducted by contractors.
You need to pay your Self Assessment tax bill (and any taxes owing) before the deadline (the 31st of January that follows the end of the tax year). HM Revenue and Customs will pay money back to you if a refund is due.
CIS subcontractors with 'gross payment status' should declare all the income using the standard method in the Corporation Tax return.
You should claim back any paid CIS deductions through the monthly payroll scheme for your company. Trying to claim back deductions through a Corporation Tax return can result in a financial penalty.
Note: A different section explains the full process of running payroll and the tasks employers need to complete.
The company PAYE bill may get reduced to zero for the period. In this case, you might still have CIS deductions not yet claimed back.
You should carry these forward to the next month or to the next quarter (as part of the same tax year). You can notify HM Revenue and Customs that you have nothing to pay using the Employer Payment Summary (EPS).
As a limited company, you must keep a record of amounts you claimed back against the monthly or quarterly PAYE bill. You can either use 'Form CIS132' to record how you set off the deductions or you can keep your own records.
What happens if you paid too much in CIS deductions? In this case, HMRC will pay back any deductions that the company has been unable to claim back from its PAYE bill during the tax year.
Note: Read how to claim a refund of Construction Industry Scheme deductions as a limited company.
You would have several responsibilities if you put your company into administration or you liquidation your limited company. Thus, the person who is managing it should write to HM Revenue and Customs (HMRC) and ask for CIS deductions to be repaid without delay.
NIC and EO
HM Revenue and Customs
In some cases, you may not get all the CIS statements needed from the contractors. If not, you should ask them to send replacement copies to you instead.
You may still not get all your CIS statements (e.g. if the contractor stops trading). In this case, you should write a letter to HM Revenue and Customs (address above) and include this information:
Paying Tax and Claiming Back Deductions as a CIS Subcontractor in United Kingdom