Companies involved in construction will be well aware of the Construction Industry Scheme (CIS). Under this scheme, the prime contractors must take responsibility for their subcontractors’ tax and National Insurance liabilities by deducting the appropriate percentages from their subcontractors’ payments and passing these on to HMRC.
When these subcontractors submit their own tax returns to HMRC at the end of their financial year, these CIS payments are then taken into account as advance contributions when calculating their tax liability.
Whilst this may not sound too onerous a task when looking at one company working with a single subcontractor, this does not reflect the reality of working in the construction industry. For example, one of our many clients in this sector is Greencore Construction. They have built a great reputation for designing and building high-performance eco-friendly homes that meet Passivhaus energy efficiency standards across Oxfordshire and the surrounding counties.
At any one point in time, Greencore could be working on ten active projects with over 40 specialist subcontractors each working on individual and specific elements of the build process across their portfolio. To make this even more complex, the actual CIS percentage rate due for each of these subcontractors may differ depending on whether the subcontractor is already registered under CIS and also whether it is a gross or net deduction (as applicable to some limited companies etc.)
So, there are two major headaches for the prime contractor with this scheme. Firstly, there is extra work involved in setting up a new subcontractor but, more importantly, it’s a hard challenge to manage their precise CIS contributions – especially as these contributions are likely to change every month as subcontractors complete their tasks and new ones come on board.
Fortunately, this is where CJ Bookkeeping really makes a difference. When Greencore Construction takes on a new subcontractor, they simply pass the subcontractor’s company number and Unique Tax Reference (UTR) to Clare and her team at CJ Bookkeeping. Clare then informs Greencore which “tax treatment” applies to their new subcontractor and then, on receipt of the subcontractor’s invoices, she deducts the correct CIS percentage from the requested payment. She then pays the balance to the subcontractor and then, every month, she pays HMRC the correct total CIS liability for all subcontractors actively employed on projects during that period.
As CJ Bookkeeping handles all of the bookkeeping at Greencore Construction, the management can see a detailed view on cash flow, subcontractor payments, payroll, PAYE liabilities as well as their CIS liabilities. CJ Bookkeeping also supplies each subcontractor with their statements of pay and the CIS deductions already taken. In fact, a number of subcontractors have subsequently hired CJ Bookkeeping to look after their books as well!
“Clare and her team have really simplified this time-consuming task for us,” says Ian Pritchard, Managing Director at Greencore Construction.
“They have dramatically simplified the process of adding a new subcontractor and her team has reduced any potential CIS payment errors keeping us in compliance. With their regular reporting we can easily see our actual and forecast income and outgoings and really know the state of our business from day to day.”
So, if you’re in the Construction Industry and would like to save time, reduce errors, and have a clear view of all of your CIS liabilities, give Clare a call on 01327 262453.