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.
Sole Traders and Partners Under CIS
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:
- The full amounts that show on your invoices as received ‘income’.
- Any deductions that contractors made in the field marked ‘CIS deductions’.
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.
Limited Companies Under CIS
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.
- Send your monthly Full Payment Submission (FPS) to HMRC in the normal way.
- Send an Employer Payment Summary (EPS) entering the total CIS deductions for the year to date.
- HMRC will deduct your CIS deductions from the amount you owe in PAYE tax and National Insurance. You should then pay the balance by the usual date.
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).
Keeping Company Records
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.
Overpayments of CIS Deductions
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.
If Your Company goes into Administration
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
Getting Replacement CIS Statements
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:
- Your full name, address, and your Unique Taxpayer Reference (UTR).
- The name and the address of the CIS contractor involved in the dispute (and their tax reference if known).
- The dates of either the payments or tax months when the contractor paid you and the reason why you are unable to get the original CIS statements or any duplicates.
ALSO IN THIS SECTION
How to Get Paid | Find out how standard deduction rates work and what does not count as your pay.
Gross Payment Status | How to apply for gross payment status at the same time as registering for CIS.