Construction business will be familiar with the Construction Industry Scheme (CIS) in which HMRC set out rules on how subcontractors in the industry should be paid.
Within the CIS scheme, a percentage of a payment from a contractor to a subcontractor is deducted and paid directly to HMRC. In the UK construction industry subcontractors (which includes many small businesses) must register with CIS.
For contractors who choose to use a CIS-registered contractor, it is the contractor’s responsibility to deduct their tax. At present, 20% is deducted from the invoice for registered subcontractors – which should be stated on the invoice – whereas 30% is deducted for unregistered subbies.
When it comes to CIS accounting, the tax deducted from a subcontractor’s invoice is usually held in the accounts system and posted to a holding account, before being paid to HMRC in the following month. These deductions not only count towards the subcontractor’s pay but also contribute for tax purposes.
For contractors not using a construction-specific accounting system, CIS accounting can be a pain. From initially verifying and managing subcontractors before any work is undertaken, through to payroll, and then holding CIS deductions before paying these to HMRC – it can be a laborious process for construction businesses.
This represents a particular problem for large construction contractors who rely on subcontractors and work with hundreds – or even thousands – of different subbies, with different payment terms.
With applications, retentions, additions and deductions to deal with, CIS accounting can become a minefield for the accounts team, not to mention a hugely inefficient process.
So how can our CIS accounting software help?
Verify & manage subcontractors more quickly
Verifying subcontractors is often the first step in the CIS accounting process, and with our software’s direct link to the CIS database, users can verify subcontractors at the click of a button. Once verified, it’s easy to manage subcontractors, along with storing relevant documentation, such as insurance expiry dates, skills and training documentation, and more.
The storage of insurance expiry dates within the system means the software will make it difficult to use and pay subbies whose insurance has lapsed, helping to keep your construction business compliant.
Make CIS accounting payroll quick & easy
Accounts teams often lose entire days when it comes to processing payroll, thanks to the diverse nature of the workforce and their payroll requirements.
With salaried staff, hourly and daily rates, plus weekly, fortnightly and monthly payment schedules, not to mention applications, retentions and deductions, processing the payroll can take a considerable amount of time.
With in-built CIS accounting – as opposed to a bolt-on system – in our construction-specific accounting software, payroll becomes far easier than it used to be!
Reducing the time your team spends on payroll frees them up for other tasks, making your accounts team more efficient and productive.
Submit CIS returns from the system
The final – and perhaps the most important – part of the CIS accounting process. Contractors will know that CIS returns have to be submitted to HMRC each month, even if no payments have been made that month, and our system makes this really easy with its direct link to HMRC.
With one-click submission to HMRC, you can tick the CIS return off your to-do list quicker than ever before.
To find out more about how our construction-specific job costing and accounting system can help with your business's CIS accounting process, contact us today. It’s easy to book a demonstration to see how our software can specifically address the issues your construction business faces.