CIS Introduction

Related topics: CIS Subcontractor, CIS Partnership List, Transaction Entry, Transaction Adjustments, Subcontractor Summary, Invoice Authorisation, Remittances, HMRC request Match/Verify, HMRC Check for responses, HMRC Match/Verify responses, HMRC Gateway Response, HMRC Data Validation

The CIS module allows you to store additional information about your Suppliers when they are Subcontractors under the Construction Industry Scheme (CIS).

The module requires a specific unlock key to be purchased. Please consult with your support provider.

With the CIS Module, you can:

Store key information against each subcontractor record and to enable deductions (for tax and CITB Levy) to be made at the correct rates.
Interacts with the Purchasing module allowing the processing of subcontractors invoices & payments.
Account for any tax that is with-held from payments to subcontractors under the scheme and you will be able to provide statements of deduction to the subcontractors and monthly returns to HMRC.
Match and verify Subcontractors against HMRC records electronically.

The module does not cover accounting for retentions or applications for payment via the Sales or Purchase Ledger.

‘Contractors’ and ‘Subcontractors’, but the terms have a much wider meaning than they used to have. Contractors include not just construction companies and building services but also government departments, local authorities and any businesses that might normally be known in the industry as clients. This is because any non-construction business that spends more than an average of £1 million a year in any 3 year period on construction work is covered by the scheme.

The CIS scheme from 2007

There is no longer any need for CIS cards, certificates or vouchers. Although subcontractors will still be paid either net or gross, HMRC will tell the contractor which tax treatment to use. Reliance on cards and certificates has been removed.

Contractors must ‘verify’ the tax status of new subcontractors with HMRC. You will be able to do this by telephone, via the Internet or electronically using your Access Accounts software.
Subcontractors registered under the existing rules can be transferred over to the new system without having to be re-registered or having their tax status verified.
A contractor may not pay a subcontractor until their tax status has been verified by HMRC. The record should be marked as having a tax status of Unmatched until a tax status is received.
If HMRC has no record of a subcontractor’s details, they will issue a higher rate tax deduction notice. Tax should be deducted at the higher rate until notified otherwise.
All subcontractors, from whom tax has been deducted, must be supplied with a written payment statement at least once a tax month. Subcontractor Statements can be produced monthly or every time a subcontractor is paid.
Every month, contractors must make a return to HMRC of payments made to all subcontractors. You can do this via a pre-populated paper report produced by HMRC, via the internet using HMRC’s software or electronically using your Access Accounts software.
Each time a return is made contractors must declare that none of the workers listed on the return are employees. This is called a Status declaration.
Where no payments are made in any tax month a nil return must be made or financial penalties will be incurred.
CIS annual returns are no longer required.

Setup in Access Accounts

Before you setup the system options for the CIS module, you should consider how you will be recording the transactions in the Nominal Ledger. Any new Purchase Analysis records and Nominal Accounts you need can be created 'on the fly' whilst entering the System options but you will find it easier to have a plan before you start.

System options are selected and entered on the CIS Subcontractors Options window opened from CIS Subcontractors Options.
The options are stored on four tabs cards covering Tax Rates, Analysis Codes, Company Defaults and Submissions.
Subcontractor information is added to the Supplier record by ticking the CIS option on the face of the record window to activate the Subcontractor icon.
Clicking on the Subcontractor icon will open the CIS - Subcontractor window where you can enter CIS information including the Tax Status of the supplier under the scheme and their UTR (unique tax reference).
You may also find it helpful to enter the correct Purchase Analysis code on the Transaction Detail section of the VAT window. This will be the purchase analysis on which you have ticked the CIS Taxable option. This analysis will then be entered as the default on transactions, ensuring that CIS Tax rules are applied if appropriate.
You will need two Purchase Discount type analysis codes to record deductions made for tax under the CIS rules and for CITB Levy.

EXAMPLE 1:

Analysis Code	Debit	Credit
CIS Tax	Creditors Control Account in Balance Sheet	PAYE, NIC & CIS Tax liability in Balance Sheet
CITB Levy	Creditors Control Account in Balance Sheet	CITB Levy liability in Balance Sheet

In addition, the Purchase Analysis record that will be used to record taxable costs under the scheme must be flagged as CIS Taxable before transactions are entered.

EXAMPLE 2:

Analysis Code	Debit	Credit	CIS Taxable?
CIS Subcontractor Labour	Labour costs/Cost of Sales in P&L	Creditors Control Account in Balance Sheet	YES - indicating that, if the Supplier's tax status indicates, tax should be withheld from transactions posted using this analysis.
CIS Subcontractor Materials	Material costs/Cost of Sales in P&L	Creditors Control Account in Balance Sheet	NO - indicating that tax should not be withheld from transactions posted using this analysis.