If you’re an accounting/bookkeeping firm, or payroll bureau and have clients in the UK working in the construction industry, you may be familiar with the Construction Industry Scheme (CIS)
What is CIS?
CIS is an HMRC tax requirement that sets out rules on how contractors handle payments to subcontractors for construction work.
What you and your clients must do
When working with contractors (your clients), it’s crucial to make sure they understand their obligations and remain completely compliant throughout the process. Under CIS, there are tasks and calculations to consider, including:
- The identification of subcontractor details
- Verification of subcontractors with the HMRC to determine their tax status and what will be withheld
- Recording subcontractor rates, hours worked, and other deductions such as VAT, materials, or machinery used
- Distribution of payslips and payment and deduction statements to subcontractors
- Filing reports after the end of each tax month
What subcontractors must do
When working with subcontractors, you and your clients need to ensure that subcontractors have an accurate running total of taxes withheld and receive CIS correctly from invoice to payment. Under CIS, they should:
- Register with HMRC before they are verified by the contractor so that they get taxed at the right rate
- Offset CIS deductions suffered in their Employer Payment Summary (EPS)
Introducing the CIS functionality in Employment Hero Payroll
Manually calculating CIS deductions can be a time-consuming process. Human error can also cause costly mistakes for your clients.
At Employment Hero Payroll, changing the way our partners work and pay is our main priority. Employment Hero Payroll is the first payroll software in the UK to help contractors, subcontractors, accountants, bookkeepers, and payroll bureaus manage the CIS easier. With deductions automatically calculated from subcontractor invoices in Employment Hero Payroll, you and your clients can save time and be confident CIS deductions are always right.
How does Employment Hero Payroll’s CIS help?
1. Automatically verify subcontractors with the HMRC
Employment Hero Payroll caters to all subcontractor types, including companies, trusts, sole traders, and partnerships. Store and verify subcontractor contact information and tax details and apply any details to CIS with one tick.
2. Correctly calculate CIS deductions
Keep track of pay categories such as labour, materials, and VAT in one place. Automatically calculate deductions from subcontractor invoices and have confidence the right amount is paid. Submit returns to HMRC with just one click.
3. Allow easy payments
Include CIS deductions before making payments and set weekly, fortnightly, or monthly pay schedules. Generate and automatically send payslips and payment & deduction statements to subcontractors.
4. Automate CIS reporting
With Employment Hero Payroll, you and your clients can produce, submit and distribute the necessary documents and information to process CIS deductions. Automatically apply CIS deductions to PAYE, payslips, P32s, CIS300 and payment and deduction statements.
5. Bureaus can consolidate systems
Traditionally, CIS is only available in accounting packages. For bureaus to gain access to CIS for their clients, they often have to dish out extra costs for accounting packages they don’t necessarily need for any other purpose. Using Employment Hero Payroll, bureaus can eliminate the need to use an accounting system to manage CIS for their clients, and streamline payroll management and data within just one platform. That’s savings on costs and double handling!
The CIS tool is available now as a separate cost for all partners of Employment Hero Payroll and will help you and your clients reduce manual work and risk of errors, automate compliance and save costs in the long run.
Want to learn more about Employment Hero Payroll’s CIS? See our support article or get in touch with us.
Disclaimer: The information in this article is current as at 31 May 2022, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.