The Construction Industry Scheme (CIS) in the was introduced to help regulate taxation for contractors and subcontractors self-employed in the UK. As such, it’s a crucial part of the invoicing process for those registered (as well as unregistered!) and when it comes time for self-assessment filing.
Invoicing software like Debitoor can help. By taking the calculation process off your hands and allowing easy application of the deduction, invoicing under CIS can be simple and fast.
How does CIS work?
When raising an invoice, a CIS-registered subcontractor would have an additional line for the special tax deduction scheme. The rate for registered subcontractors is 20%, but if unregistered, it jumps up to 30% of the total.
It is possible to have 0% - in other words, no deductions, if you qualify for ‘gross-payment status’ by proving to HMRC that your annual turnover exceeds £30,000 as a sole trader, for each partner in a partnership, or each director in a company, or if the partnership or company makes over £100,000 annually.
The tax deduction does not, however, apply to all aspects of a job. It applies only to the labour parts. More specifically, the deduction will be made from the amount after removing any charges for:
- Materials used (and production of materials)
- Equipment (rented or rendered unusable)
- Fuel used (except for in transit)
- VAT
The deductions made on labour are paid by the contractor and are treated as an advance on your National Insurance and your tax bill.
CIS in Debitoor
In Debitoor, we’ve introduced the option to easily add the CIS deduction scheme to all of your invoices. By enabling the scheme and entering whether your deductions are 20% or 30%, you can then select or deselect the deduction for each item listed in your invoice template.
This ensures that the CIS deduction applies only to the appropriate items on your invoice, only to specific costs to the contractor.
At the bottom of each invoice, you’ll see the subtotal, applicable VAT and then the CIS deduction rate and total amount based on the above tax and deduction.
CIS in your records and reporting
When you create an invoice with a CIS deduction, this will automatically be noted in your account. Our simple data export provides a full list of your deductions for a given period in their own column in an Excel or .csv spreadsheet.
This allows you to specify the particular period for which to view total CIS deductions and manage these amounts separately from your invoices, allowing for fast and easy calculations for reporting in your Self Assessment tax return.
