Guidance on submitting a CIS monthly return correctly is a key component of ensuring that construction contractors are compliant with HMRC for the UK. But when you have deadlines to meet, subcontractor verification rules and possible penalties for errors, it can seem more complicated than it really is.A CIS return isn’t just an administrative chore. It’s a formal document showing payments to subcontractors and deductions taken from them during a particular tax period. Adding up errors, late submission or declaring the wrong employment status can cause unnecessary issues.Fortunately, by understanding the process and keeping good bookkeeping records, the process of submitting a CIS Monthly Return to HMRC correctly gets much easier.This guide will explain what a CIS monthly return is, who is required to submit a monthly return and what information you will need to help you stay compliant.
What Is a CIS Monthly Return?
The Construction Industry Scheme (CIS) is a scheme operated by HMRC which impacts on contractors and subcontractors in the construction industry.The scheme requires that the contractors deduct money from the subcontractors’ payments and then pass on the deductions to HMRC. The contractors are also required to make a monthly return using the CIS to report all payments covered by the contract that are relevant to the return.The return is for the CIS tax month, which is normally the 6th of one month to the 5th of the next month.
For example:
- The tax period for the CIS is 6 May until 5 June.
- The deadline for CIS return is 19 June.
The contractors are required to report payments to their subcontractors, including payments to subcontractors that are registered for gross payment and those that would be subject to CIS deductions.
Who Needs to Submit a CIS Monthly Return?
The majority of businesses classified as ‘CIS contractors’ are required to deliver monthly returns to HMRC.This can comprise construction businesses with subcontractors for non-residential qualifying construction work.The contractor is responsible for submitting the return. So it is important that good records are kept throughout the month.One of the common errors is assuming that only in cases where CIS deductions have been made can a return be required. Not necessarily the case. HMRC must be notified of payments made to a contractor for any payments that are relevant to their subcontractors, including gross payments if applicable.When in doubt you can ask for professional accountancy and taxation advice to understand your obligations if your business is subject to the CIS requirements.
The following are tips on how to complete and return a CIS monthly return to HMRC correctly
A structured approach makes the task of CIS return easier and simpler.The first step in managing a subcontractor is to maintain accurate records with them.Before preparing your return, make sure your records are complete and up to date.
It is important to keep up to date records of subcontractors that have been contracted and payment schedules, identifying details etc
Good bookkeeping can make it easier to avoid the last minute hassle of finding invoices, bank statements and payment records.
The following are examples of good bookkeeping practices:
1.Promptly record subcontractor invoices.
Correctly recording dates of payments
It is important to stay up-to-date with subcontractor information.
- Reconciling payments and bank statements
- Keeping good records about CIS deductions.
- Properly uniting labour and other relevant costs
CIS errors often occur before the return process, because of inadequate record keeping.
Step 2: Prepare a draft for Your CIS Tax Period.
Before entering in any numbers please remember to check the right time.
CIS tax month does not start the first calendar day in the month and end the last calendar day of the month. Rather it typically operates from the 6th of one month to the 5th of the next month.This is a simple detail that can be overlooked.If you are preparing a June return, for instance, you can’t necessarily presume that it will include a 1 June to 30 June return. Take care to review the relevant CIS tax period thoroughly.The incorrect period may lead to misreporting or no reporting of payments.
Step 3: Confirm Subcontractor Details:
Contractors must make sure that subcontractors are dealt with appropriately under CIS prior to making payments.The accuracy of the subcontractor information is crucial due to potential impact on the deduction process and information submitted to HMRC.
Prior to filing the monthly return, check:
- Subcontractor names
- Relevant tax references
- Payment records
- CIS deduction status
- The amount of payment during the tax period
A monthly review provides a practical check to ensure that no discrepancies are filed as errors.
4.Carefully calculate payments and CIS deductions in
Then look at the payments that were made to each subcontractor for the tax month in question.
You should have accurate records of:
- Total payments made
- Relevant CIS deductions
- If applicable, payments made under gross payment status
- Never use approximations.
If a small construction company has worked with five subcontractors in the month, for example, you might expect to find five of these in the database.If a small construction company has five subcontractors that they have worked with in the month, for example, there would be five of those in the database. The business owner may have a general idea of the amount paid to each person, but it’s important to use financial records to report on CIS.That’s where good bookkeeping can make a huge time saver.
A good accounting system can help you to identify:
- If a contractor’s subcontractor is paid
- How much was paid
- A CIS deduction was applied or not.
It is important to determine whether the payment is in the correct CIS period or not.Rewrite the answer to this question in your own words.Rewrite the answer to Step 5 in your own words.
5.This step is especially noteworthy.
Contractors make a declaration about the status of the subcontractors included in a CIS monthly return.Mistreating an employee and treating them as self-employed can lead to significant tax and compliance problems.It should not be assumed that a person is not in employment if he prefers to be paid as a subcontractor.Care needs to be taken when considering the status of the business and professional advice should be sought where it is uncertain.But HMRC will impose harsh penalties for incorrect employment status information on a CIS monthly return, it warns.
Step 6: Return to HMRC or through Approved Software.
Monthly returns for CIS are now submitted via HMRC’s online CIS service or recognised commercial software.Read through all entries to check before submitting.
Check that:
- The right CIS period is identified
- All pertinent subcontractors are covered.
- The amount of payments is correct.
- Deductions are posted properly
- Information about employment status is accurate.
- There are no obvious data entry errors noted.
- Take your time for this last review.
By taking a few additional minutes to verify the return, hours of work can be avoided in correcting the error.
7.To ensure that evidence of your submission is kept:
After the return is sent, make sure to maintain good records.
You should record on your books:
- The period covered
- Subcontractor payments reported
- CIS deductions made
- Submission confirmation
- If a correction is made in the future
Compliance checks are easier to perform with good financial records.They also assist in wider business activities to include preparing accounts, management accounts and tax planning.
If You didn’t pay your Subcontractors?
One mistake that many people make is assuming that the monthly CIS return isn’t complete if no payments were made to subcontractors.
That can cause problems.
If you haven’t paid anything, you might need to provide a nil return or to inform HMRC that you’ve stopped using subcontractors for a period of time by using an inactivity request.If a contractor does not expect to make any payments to subcontractors within the next few months then he or she may be able to advise HMRC of the period of inactivity. HMRC guidance clarifies that inactivity may also apply for a limited amount of time, so as to avoid the monthly filing requirements whilst no payments are due.Don’t assume that a nil return is the same as taking no action.
Avoid the following common mistakes with the Monthly Return when filing the CIS
Even seasoned contractors can find themselves in trouble when paperwork piles up.These are some of the most frequently occurring problems:
The Last Minute is all about leaving late.The Last Minute is about leaving until the last minute
Storing it at the last minute makes it more susceptible to mistakes.Payment status could be missing, invoices may be outstanding, subcontractor data could be missing and require verification. Book time towards the end of every CIS period to make up figures.
Doing an inadequate job of bookkeeping records
Confusion can easily arise from the use of spreadsheets, paper notes and unreconciled bank transactions.Accurate accounting provides a more accurate view of your subcontractor expenses and monthly obligations.Cloud accounting solutions have also evolved to assist companies in maintaining their monetary data orderly all year round.
Reporting the wrong CIS Period
Keep in mind that CIS has its own tax month.
Before preparing figures, always verify the dates!
Forgetting About Nil Returns
Just because there are no payments due from subcontractors doesn’t necessarily mean there’s no action that needs to be taken.To know if you should report inactivity or make a nil return.
Incorrect Employment Status
Not all workers who work for CIS can be considered self-employed.If there’s uncertainty about the working relationship, please get expert advice before making declarations.Ensuring that supporting records are not kept.Not keeping supporting records.
Filing a return is not the only aspect of compliance.
Keep the financial records supporting the figures you report.
CIS compliance is streamlined with reliable bookkeeping.Reliable bookkeeping is helpful in facilitating CIS compliance.
The compliance with CIS begins well before the 19th of the month.The ease with which your bookkeeping is done may influence the ease of filing.Regularly updating bookkeeping makes it very easy to find out if any subcontractor payments have been made, and also review deductions.
Here is a good process that could look like this every month:
- Make sure that the subcontractors invoices are submitted quickly.
- Make and keep records of payments.
- Ensure balance of financial records.
- Regularly review CIS deductions.
- Review the figures at the end of the month after the 5th.
- Make the return preparation in advance.
- Submit prior to the 19th.
Keep confirmation and supporting documents.This also helps to ensure the awareness of cash flow and financial planning.CIS is no longer a monthly crisis, but a part of everyday business management.
Citygate Accountants can help you with a variety of services
For busy construction companies, it can be difficult to maintain financial records when there are project deadlines to meet.According to Citygate Accountants‘ website, they offer accountancy and bookkeeping services, taxation services, VAT services, payroll services, management accounts, HMRC investigation support, compliance services, and more. The firm also offers consulting services to contractors on CIS.Accounting and bookkeeping services are especially helpful when a business desires greater trust in its financial records and greater financial compliance.An expert accountant can help the businesses not just with a deadline but also by optimizing the systems involved in the financial administration of the businesses.This can encompass the duty of ensuring that the books are kept up to date, looking at the finances and making sure that they are in order for tax purposes.Citygate Accountants believes that providing financial management solutions that are business-minded, customizable and harnessing qualified accounting experts is key to success. It offers services to cater to the needs of businesses at various stages, ranging from day-to-day financial documentation to accounting and tax needs.Professionally, support can ease administrative burden and keep things more streamlined for contractors who receive the same contractors frequently.
Keep up with CIS returns – Best Practices
Avoiding CIS problems is best done by establishing a repeatable process.
Take these practical measures into consideration:
Set a monthly reminder for the event.
Don’t use rote learning.Set reminders for each month right after the 5th and well in advance of the 19th.
Reconcile Payments Regularly
Reconcile the accounts to the bank.This aids in detecting missing or duplicate records.
Ensure that Subcontractor Records are kept up to date.
Make sure that details are kept up to date when things change, not when it is time for the next return.
Take a look at Your Financial Processes.
If it’s taking you several days to file a CIS each month, you could need some work on your record keeping.Compliance can be quickened and more accurate with better bookkeeping.
Don’t wait until you have a problem to ask for advice.
Where any errors are found or doubt exists regarding an obligation under the CIS, deal with it in a timely manner.Getting advice (preferably early, not post penalty or compliance) is generally more helpful.
Final Thoughts
Completing a CIS Monthly Return to HMRC Correctly is not just about keeping to the deadline. Well kept records, bookkeeping, paying attention to payments and a clear monthly process are all important. The important day to keep in mind is the 19th, but the concept of good CIS compliance begins well before that date. An up to date record of subcontractors is essential and by checking transactions during the month, contractors can minimise errors and last minute pressure. If you require further assistance with bookkeeping, taxation and accountancy as well as other financial compliance, Citygate Accountants can offer professional advice specific to business. A well-structured financial process can simplify CIS reporting and aid in more effective business decisions.
FAQs
When is the monthly return of CIS due?
Normally a monthly return for CIS needs to be submitted to HMRC by the 19th of the month after the end of the period the CIS covers. Tax month runs generally for the 6th of the month to the 5th of the following month.
If I paid no subcontractors do I have to submit a CIS return?
If no payments are made then you may have to report a nil return or tell HMRC that you are not using subcontractors for the time being. You are not done if you just file it late; there can still be late filing fines.
What are the consequences of late submission of my CIS monthly return?
Penalties are able to be imposed by HMRC for late returns of the CIS. The first penalty period may be applied for untimely returns, and additional penalties may apply for returns that are not picked up for longer periods of time. Filing early minimises compliance risks.
Is it possible to return the CIS each month online?
Yes. HMRC provides contractors with a monthly return facility in relation to CIS which can be completed through the online system or via recognised commercial CIS software. Often double-check the information before submitting, and keep copies of your submission.
What information should I review prior to filing a CIS return?
Check the applicable CIS deductions, the correct period for the CIS, subcontractors details, payments made and employment status information.
Why is bookkeeping important to CIS contractors?
Good bookkeeping will give you an orderly history of subcontractor payments and deductions. It facilitates wider accounting compliance and eases monthly CIS reporting for business owners who don’t need to hit the “documents” button last minute before the deadline.