Construction accounting basics
All contractors must register for the Construction Industry Scheme (CIS). The HM Revenue and Customs (HMRC) scheme means that contractors must deduct money from self-employed subcontractors’ payments which is passed directly to HMRC.
In this blog, we take a closer look at the requirements of a contractor registered with CIS.
Who must register?
Contractors must register for the scheme if they pay subcontractors for construction work or where over £3 million has been spent on construction in 12 months since the first payment. What’s more, you don’t need to be a contractor for this to apply.
If you’re not sure if you need to register, you can check who needs to be covered by CIS here. You can also speak with your accountant about your obligations as a contractor in the construction sector.
What’s required as part of CIS?
If you need to be CIS registered then make sure you have registered with HMRC prior to working with your first subcontractor.
You also need to check whether you should employ a person rather than use them as a subcontractor. HMRC has further guidance on this here.
Whilst subcontractors are not required to register, as a contractor you need to be aware that deductions taken from their payments are at a higher rate when they’re not registered. You can find out if your subcontractors are registered for CIS via HMRC by signing into the online service.
You are responsible when you pay subcontractors to make deductions and pay HMRC. This counts towards the subcontractor’s tax and National Insurance bill.
You’re required to file monthly financial returns and keep full CIS records. If returns or records are not kept up to date with all the detail you may incur a penalty.
As with anything regarding your business, if there are changes, then keep HMRC informed.
If you work with an accountant, they can help you navigate the requirements so that you provide the necessary records and meet deadlines.
CIS refunds
If you’re a limited company subcontractor, or an agent of a limited company, there may be instances where you pay too much tax or National Insurance and therefore you are entitled to claim a refund of your CIS deductions. You can claim CIS repayments here.
An accountant can help identify where repayments may be needed and help with your claim.
Cloud-based software for compliance
At McKenzies, we often help our clients keep CIS records up to date and prepare monthly returns.
We can also help set-up clients’ cloud bookkeeping software. Using cloud-based accounting software such as Xero can help with compliance. For those in the construction sector, it can enable you to run your monthly CIS returns, produce statements for your subcontractors and report CIS suffered.
Why speak to McKenzies accountants about CIS
Working with a professional accountant will ensure you have the support to help you prepare your monthly returns, make payment to HMRC and importantly help your business growth plans by keeping you on track and highlighting any issues well in advance.
Many of our construction clients use Xero to help with their bookkeeping. We are a Platinum Xero Partner and can help you get set-up and offer you training on Xero. We will then support you through your Xero journey, including research on suitable integrations and apps.
We can also take on a role of your bookkeeper as much or as little as you need, which gives you flexibility over your time and costs and peace of mind when you need support.
We’re accountants in Oxted, contact us for accounting services such as business advice, guidance and managing financial accounts.