What information goes on a CIS return?
The CIS return is a pretty similar concept to the PAYE scheme which employers use. It’s basically a tool for contractors to tell HMRC about any subcontractors they’ve paid that month, how much they paid them, and about any deductions.
Like an employer does for an employee through PAYE, contractors deduct tax and National Insurance from their subcontractors’ pay, and then send this on to HMRC on their behalf. Essentially, the contractor is a bit like a tax collector in that respect.
Will my subcontractor need to send a tax return?
The subcontractor will still need to submit their own separate tax return, and include the details of this income (and deductions). The type of tax return they must use depends on the business structure they operate under.
A sole trader or partner must submit a Self Assessment tax return, and a limited company sends a company tax return.
What CIS registration means for CIS returns
It’s up to the contractor to make sure that the subcontractor is registered for CIS with HMRC, because this affects how much tax they must deduct from a subcontractors’ pay.
- 0%, if the subcontractor has gross payment status, and no deductions are made.
- 20% if the subcontractor is registered.
- 30% if they’re not, or HMRC can’t verify them.
You’ll need to include the details of these deductions each time you submit your CIS return. This is so that HMRC know the subcontractor has already paid the right amount of tax.
When should I submit my CIS return?
CIS returns are submitted on a monthly basis. You must report the previous tax month’s (which starts on the 6th and ends on the 5th) activities by the 19th of the following month. If you don’t use any subcontractors one month, you won’t need to submit a CIS return, but you will need to tell HMRC. Otherwise, they’ll just think it’s late, and you’ll receive a penalty!
Do I need to tell my subcontractors about my CIS return?
You’re only required to give your subcontractors a CIS statement if you deduct any tax from their pay – but best practice says you should provide a statement anyway.
Can someone help me with my CIS return?
Of course! You don’t have to calculate or submit your CIS return alone, and can ask an accountant to help you.