CIS Processing

Overview

The Construction Industry Scheme (CIS) is a tax scheme in the United Kingdom that allows contractors and subcontractors in the construction industry to manage their tax affairs more easily. It was introduced by HM Revenue & Customs (HMRC) to simplify the way taxes are handled in the construction industry.

Here's a brief overview of the CIS:

Key features:

1. Registration: Contractors and subcontractors must register with HMRC to use the CIS.
2. Tax deductions: Contractors deduct taxes from payments made to subcontractors and pay them over to HMRC.
3. Subcontractor status: Subcontractors can choose to be registered as either exempt (no tax deductions) or standard (tax deductions are made).
4. Payment terms: Contractors must pay subcontractors within 30 days of receiving payment from the client.

Benefits:

1. Simplified tax administration: The CIS reduces the administrative burden on contractors and subcontractors.
2. Reduced tax compliance: Contractors and subcontractors can focus on their core business, rather than dealing with complex tax issues.
3. Improved cash flow: The CIS helps ensure that subcontractors receive payments on time.

Types of CIS schemes:

1. CIS Standard: This is the most common scheme, where contractors deduct taxes from payments to subcontractors.
2. CIS Exempt: Subcontractors can choose to be exempt from tax deductions, but they must still register with HMRC.
3. CIS Self-Certification: This scheme allows subcontractors to self-certify their status, reducing the need for contractors to make tax deductions.

Setup of CIS

Accounts Payable Company Controls

The Accounts Payable Company Controls must be setup first. This option is only available for Advanced staff, please raise a support case for more information on the setup.

The following information is required.

A Withholding Indicator must be specified in order to determine which type of withholding processing is in operation, e.g. CIS.

Validate Unique Tax Reference - leave this blank, this is for future development

CIS at Element Level - Set this flag if the CIS Statement reports and CSV files are to be produced per ICA Element and separate Contractor Registration Details can be held per ICA element.

Tax Authority Supplier - Enter a Supplier Number for use as Inland Revenue Account for CIS. When processing the invoice via payment processing part of the payment is withheld, then the value withheld will be inserted as a Tax Adjustment Transaction under this account.

This supplier can be setup in the usual way, set the Hold Invoice Flag, when you setup the Inland Revenue account.

Tax Rate - Enter the current CIS Tax rate

Non-Compliant Tax Rate - only applicable to PPS processing not CIS

Number of days to Tax prompt - Enter the number of days warning required. A literal appears on the Transaction Enquiry screen warning the user if the Supplier's CIS certificate or registration card is due to expire within the number of days specified here.

Tax Contractor Number - Enter the Contractor Tax Reference, up to a maximum of 13 characters.

Tax Contactor Name - Enter the Name the company is known as, by the Tax Authority, up to a maximum of 35 characters.

Contractor Details

Unique Tax Reference - Enter the Contractors Unique Tax Reference (UTR).

Suppress CIS Warning - A warning message will be presented when a transaction is entered for a CIS5 or CIS6 Supplier in data entry. Set this flag if you want to suppress this message when no lines are flagged for withholding for a CIS5 or CIS6 Supplier with a valid certificate.

Accounts Office Reference - Enter the Contractors Accounts Office Reference.

Employers Reference - Enter the Contractors Employers Reference. This field is mandatory if CIS is applicable for the Company.

Supplier Setup

Access the following menus:

Accounts Payable>AP Processes>Suppliers>Maintain Suppliers

Supplier Purchasing Controls, followed by the CIS format.

Sub Contractors Name - Enter the Firms Name which relates to this Supplier, if this supplier has a New CIS Pay Status defined. The field will be initially populated by the Supplier Name but can be over-typed

Verification Number - Enter the New CIS Verification Reference applicable to this Supplier If the Verification Effective Date has been entered, then this field must also be entered

Verification Date - Enter the date that New CIS Verification became effective for this Supplier. If the Verification Reference has been entered, then this field must also be entered

Unique Tax Reference - Enter the UTR which relates to this Supplier. If the Suppliers NCIS Type is Company, then this field must be entered. If the Suppliers NCIS Type is Individual trader, then this field must be entered. If the Payment Status is Higher and this field is set to '0' then spaces will be passed to the Government Gateway

Payment Status - Enter the type of withholding tax which applies to the supplier. Valid entries are: Unknown, Gross, Standard, Higher Rate.

Subcontractor Type - Enter the Sub contract Type which applies to the supplier. Valid entries are: Company, Individual, Partner

Firms Name - If the Suppliers NCIS Type is Partner, then this field must be entered

Firms Unique Tax Reference - If the Suppliers NCIS Type is Partner, then this field must be entered ,however if the Payment Status is Higher and this field is set to '0'then spaces will be passed to the Government Gateway.

National Insurance Number -  Enter the supplier's NI number. This is only entered for CIS6 certificate and permanent CIS4 registration card holders.

Company Registration Number - If the Suppliers NCIS Type is Company, then this field must be entered. f the Suppliers NCIS Type is Partner, then this field may be entered.

Future Payment Status - Unknown, Gross, Standard, Higher Rate. This field allows the specification of a change in rate for the supplier which will happen on the Future Pay Status Effective Date. The value in this field cannot be the same as the value already held in the Pay Status field

Effective Date - If the Future Payment Status has been entered, then this field must also be entered

Data Entry

The invoice can be entered in the usual way, when entering the line details the enter a 1 in the W/Hold field for the Labour line.

Payments

When Payment Processing is ran, this will automatically calculate the Tax and deduct and that amount and place the Value on the Tax Supplier attached at Company Controls.  This tax supplier is then paid in the normal way.

When the invoice is paid, if you check the supplier enquiry screen, you will see two payments. The CIS deduction line and normal payment line. The CIS deduction line will have been transferred the nominated Inland Revenue account for payment.

Accounts Payable>AP Enquiries>Transactions by Supplier

Supplier Account

The CIS deduction is clearly labelled.

Inland Revenue Account

The CSI deduction is awaiting payment to the HMRC. This will paid on your next payment run (when due).

Reports

Access the following menus

Accounts Payable>AP Reports>CIS Reports

This will produce the report for the CIS gateway, if required.

Enter the following parameters.

Output Format - This field is mandatory, defaults to 0-Report. If set to 1-Ascii File or 2-Both will also produce a CSV file of the data which may be optionally emailed to a nominated address. If the Government Gateway is selected the file will contain summary supplier records rather than detailed transactions. However the Report (if selected) will still be at transaction Level.

Company - company code you wish to the run data for

From Date - must run from the 6th of the month

To Date - must end on the 5th of the month

Update Flag - This field is optional. Enter 'Y' or blank. If set to 'Y' then the transactions will be updated as monthly reported. These transactions will not appear on any subsequent reports.

Report All - This field is optional. Enter 'Y' or blank. If set to 'Y' then all CIS transactions within the given month will be reported regardless of if they have already been reported or not.This is intended as a re-print for old months and cannot be set if the Update flag is also set.

File Email Address - This field is optional if not Government Gateway. Will default to either the Submit Users Address or the Government Gateway email address defined with the External IP Parameters NCISGATE(from the command line use LSTEXTIP to view).If given will send the produced CSV file to the address.

Government Gateway - If selected will (by Default) use the Government Gateway email Address. Also a summary record for each Supplier is extracted rather than detailed transactions. Employment Indicator YES and Inactive, Indicator Employment Indicator YES and Inactive, Indicator Employment Indicator NO and Inactive, Indicator Employment Indicator NO and Inactive Indicator YES

Element - The CIS statement report and the CSV files will be produced as per the ICA Element entered, this is an optional entry.

Select the More>Queue>Submit action.

Followed by Submit again. Example of the report - this can also be in PDF format.

The Gateway file will be emailed.

Supplier Statements

Access the following menus

Accounts Payable>AP Reports>CIS Statements of Deduction

The Supplier Statements are produced by Process GM6 and they can be produced either for all Suppliers for a monthly period or for a specific Supplier – these Statements can either be output to the Spool as a  .txt file or they could be automatically emailed to the Supplier, in PDF format. Note the PDF format will need Advanced to set this up for you, raise a support case.

The RGG501 Statement1.txt shows a Statement for a Supplier with a Subcontractor Type of Individual (equivalent of old CIS4) where the Organisation will make the deductions on behalf of the Supplier and pay these to HMRC.

The RGG501 Statement2.txt shows a Statement for a Supplier with a Subcontractor Type of Company (equivalent of old CIS6) where the Organisation will not make any deductions but they will report all transactions with the Supplier to HMRC. 

They can be found on the Spool. Systems Admin>Spool