Back in the day (when tax returns were done through the post!), HMRC decided to clamp down on the construction industry. They believed it was far too easy for a subcontractor to keep all of their pay, and not declare the true amount earned on their tax return. So that’s why in 1971 they introduced the Construction Industry Scheme (CIS).

The law means contractors now collect income tax and National Insurance from subcontractors on HMRC’s behalf – and that’s where CIS statements come into play.

Whether you need to create them, you’re receiving them, or both – we’re here to answer the frequently asked questions around CIS statements.

Do I have to give my subcontractors a CIS statement?

CIS Statements are a bit like a payslip, in that they confirm how much tax and NI has been deducted from a subcontractors’ gross pay by a contractor.

If you’re a contractor you’ll need to submit CIS returns to let HMRC know about each subcontractor you use, how much you’ve paid them, and how much tax you deducted for CIS. You’ll also need to provide the same information to your subcontractor, in the form of a CIS statement.

Even if you haven’t deducted CIS from one of your subcontractors, for example, because they haven’t worked with you that month, you’ll need to let HMRC know why it wasn’t deducted – but in this instance you don’t need to provide a CIS statement to your subcontractor, although it’s good practice to do so.

CIS statements are important for subcontractors, helping them ensure they have all the information they need to give to HMRC on their tax returns, so they don’t end up paying more in tax than they need to. If you’re a contractor, you’ll need to ensure you’ve verified your subcontractors’ status first before deducting anything.

When should contractors issue a CIS Statement?

You should make sure your subcontractors receive their CIS statement within 14 days of the tax month period ending. For CIS purposes a tax month runs from the 6th to the 5th, so your CIS return must be submitted (and your subbie should receive their CIS statement) by the 19th of the following month.

For example, the deadline to submit a CIS return and issue a CIS statement for the tax month 6th June to 5th July is 19th July.

As a subcontractor, can I pay tax myself without my contractor deducting it for me?

If you’re a subcontractor and you don’t like the idea of your tax obligations being deducted for you, you can apply to HMRC for Gross Payment Status.

If approved, you’ll receive payments in full without having any taxes deducted – meaning you’ll need to sort it out independently, like a sole trader would when it comes to completing your Self Assessment and paying your bill.

There are strict requirements for this though, you’ll need to prove:

• You’ve always paid your tax bill on time
• And if you’re a sole trader, your turnover was at least £30,000 excluding any VAT or materials

If I’m both a contractor and subcontractor, will I receive CIS statements?

Yes – you’ll receive CIS Statements for any work you do as a subcontractor. The good news is, you’ll already be registered for CIS, so only 20% tax should be deducted.

What if I don’t have all my CIS statements?

You’ll be able to ask your contractor for replacement copies if you have any missing. If for example, they stop trading or fail to send you over another copy, you’ll need to write to HMRC to let them know you’re missing some CIS statements. When you write to them, you must include:

• You full name, UTR number and address
• The name and address of the contractor you’re missing statements from
• The contractor’s tax reference (if you don’t have it, you can miss this out)
• The missing months you’re referring to
• The reason you don’t have statements, or couldn’t get copies (for example, you lost your CIS statement and your contractor has now stopped trading)

What does a CIS statement need to include?

While there’s no set format for a CIS Statement, they must include the following:

• Contractors’ details (this will be things like name, address, and tax reference)
• The end date of the tax month the CIS statement is referring to
• Subcontractors’ details (such as their name, UTR number, verification number)
• Gross payment (not including VAT)
• Any business costs excluding VAT
• The amount of CIS that’s been deducted
• The final amount being paid

 
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