Understanding CIS Returns – Things to Know

If you’re signed up with HMRC as a contractor, you must file a CIS return every month. The CIS return indicates which subcontractors you paid in the previous month and the CIS tax amount deducted. This article will take an in-depth look at CIS submissions and everything you should know about them. 

What Is CIS?

The Construction Industry Scheme, or CIS, is a tax-deduction scheme that involves subcontractors and contractors from the construction industry. Under this scheme, a contractor will deduct a specific amount from a subcontractor’s payment and send it over to HMRC. The money is regarded as an ‘advance payment towards the subcontractor’s tax.’

Every contractor who pays subcontractors for construction work in the United Kingdom must sign up for CIS. Of course, you also have to sign up for CIS if your business doesn’t do construction work, but you have spent over £3 million on construction in the 12 months since you made your first payment. 

Even though subcontractors don’t have to register for CIS by law, deductions will be carried out at a higher rate if they decide not to. In addition, CIS doesn’t apply to payments made to PAYE employees working in the construction industry. 

Deadline for CIS Monthly Return

The CIS monthly return should be filed within 14 days of the tax month-end. Note that the tax month ends on the 5th of every month. Thus, the monthly return must be filed by the 19th. 

For instance, the monthly return ending 5th August 2022 covers all payments made to subcontractors between 6th July 2022 and 5th August 2022. The CIS submission needs to be made by 19th August 2022. 

What Happens If You Fail to Meet the Deadline for CIS Submissions?

You will have to pay the penalty if you fail to make the CIS submissions by the due date. However, you can remove the penalty should you inform HMRC that you made no payments to subcontractors that month. The exact amount of the penalty depends on how late the return is. 

Here is a breakdown of the penalties imposed for late CIS submissions. 

● One day: £100

● Two months: £200

● Six months: £300 

● 12 months: £300 

If you file your CIS returns later than 12 months, you will have to pay an extra penalty of up to £3,000. 

In case you think the penalty is wrongly applied, you can appeal to the HMRC within 30 days of the date written on the penalty notice:

● By writing a letter to the HMRC – make sure to quote your Unique Taxpayer Reference (UTR) along with the payment reference mentioned on the notice.

● Through HMRC’s online portal. 

Making CIS Payments to HMRC

Since contractors take CIS deductions from their payments to their subcontractors, they are responsible for paying this money to HMRC. Therefore, making CIS submissions confirms to HMRC how much you will pay. 

There are three different rates that contractors should use to make CIS deductions before paying them to HMRC:

● 0% when the subcontractor has gross payment status, and no deductions are made.

● 20% for subcontractors who are registered for CIS. 

● 30% if the subcontractor is not registered for CIS or HMRC cannot verify them. 

How to File CIS Returns?

You can file CIS returns by post or online. However, if you didn’t make any payments to subcontractors, you still have to file a nil return. Moreover, you can become inactive if you know that you won’t be making payments to subcontractors for up to six months. HMRC is not going to send you any returns for that duration. 

To file CIS returns online, you need to follow the steps listed below.

Step #1 – Sign In 

Click here to visit the HM Revenue login website. Enter your credentials and tap “Login.”

Step #2 

In this section, “Services you can use,” choose “Activate or access online services.”

Step #3 – Access CIS 

Choose “Access service” appearing under the section Construction Industry Scheme (CIS). 

Step #4 – Adding Your Subcontractor 

You have to add your subcontractors to be able to file CIS returns for payment to your subcontractors. If you’re filing nil returns, you don’t have to add any subcontractor. 

Choose “Adding Subcontractor.”

Select if Subcontractor is Company or Individual or other. Tap “Next.”

Fill in the subcontractor details: Name, Unique Taxpayer Reference, Company Registration Number, and then tap “Next.”

Step #5 – Verify Subcontractor 

Tap “Verify Subcontractor.” You should be able to see your new subcontractor on the table. 

Tick the box in the “Verify” column and choose “Next.”

You should be able to verify the subcontractor straight away and see their verification number. 

Tap “Subcontractor List” appearing in the left menu. You will be able to view a list of all your subcontractors. Choose the subcontractor you wish to see the details of. You can see all the details, including tax treatment and a verification number. 

Step #6 – Fill CIS Returns

In case you have not made any payment to subcontractors this month, select “Nil Return.”

However, if you’ve paid subcontractors this month, choose “CIS returns product” or “File monthly return.”

Step #7 – Choose Period 

Choose the month, and year you’re filing a return and click “Next.”

Step #8 – Choose Subcontractors

Select subcontractors you paid this month. You have to tick the box in the column titled “Include this month” to choose them. Click “Next.”

Step #9 – Fill in the Amounts

Fill in the correct amounts for “Total payment without VAT” and “Total CIS tax deducted” for every subcontractor for the month.

Step #10 – Submit Your Returns 

Enter your email address, and you’ll get a confirmation about filing the returns through email. Press “Submit.”

In Summary

If you need more information about CIS submissions, feel free to get in touch with ISA Consortium. We will guide you on how to file CIS returns. We can even take care of the task on your behalf. 

Book your free appointment with ISA Consortium

For more information and professional advice, please get in touch for a free appointment. We will discuss all the needs of you and your business, and head you in the right direction for future business .

All this and more

We offer all the above as part of our full Tax Services and Accounting and can also help you with Capital Gains Tax, Inheritance Tax, Retirement Planning, even filling out your Self-Assessment Tax Returns for you.

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