I could write a lot about this, but I will try and keep it short...

Subcontractors
If you work in the building industry and you do work for other building contractors, you are a subcontractor and you need to register with HMRC. This is quite simple and can be done online or by phone.

You will automatically have 20% of your labour costs deducted by the contractor and paid to HMRC on your behalf. The contractor should give the subcontractor a statement at least once a month which shows the total labour and materials paid and the tax deducted.

When the subcontractor prepares their SA tax return they can reclaim the tax stopped by the contractor and offset this against their tax liabilities.

If the subcontractor's tax affairs are up to date and their net construction turnover (income from construction work less materials) is greater than £30k, they can apply to HMRC for gross status. The contractors will then pay the subcontractor without making any tax deductions. Sole traders, partnerships and limited companies can all register as subcontractors. For partnerships and limited companies to apply for gross status they will need a net construction turnover of £30k per director (or relevant person).

What is considered to be 'construction work' does appear to somewhat vague i.e. maintenance is not considered to be work in the construction industry.

Builders that only work for private individuals do not need to be concerned with registering as a subcontractor!

Contractors
If you work in the building industry and you pay other people (sole trader, p'ship, ltd co.) to do work on your behalf, you will need to register as a contractor. Again this is easy and can be done online / phone.

Before you pay a subcontractor you will need to phone HMRC's CIS helpline to 'verify' the subcontractor. You will need to tell HMRC the subcontractors details (name, company name, UTR) and HMRC will give you a verification number and tell you to either deduct tax at 20% or pay them gross. If HMRC do not have any record of the subcontractor, they will tell you to deduct tax at 30%.

At the end of the month (to the 5th) you should provide every subcontactor with a statement (as mentioned above) which shows both yours and your client's details (name, UTR etc.) the amount paid and tax deducted etc. Some contractors just decide to provide a statement with every payment and this is OK. The statement doesn't need to be an official form, you can just make it up on Excel/Word.

Every month the contractor will need to submit a CIS monthly return (to the 5th) which provides details of the subcontractors paid (name, UTR, verification number, amount paid, tax deducted etc.). The CIS returns can be submitted online to HMRC. As usual, there are penalties for late submission. They will then need to pay any CIS tax deducted from the subcontractors to HMRC by the 19th of the month.

I haven't prepared a CIS return for a client for many years as I instruct them how to do the returns/statements themselves. If you want to do the CIS returns on behalf of clients you will need to register with HMRC as an agent for CIS. 

How much you charge will depend on the number of subcontractors, the client and how you would like to charge (flat fee or hourly). Please note, lots of subcontractors and contractors seem to have trouble with CIS and mistakes on statements/returns are quite common. If you decide on a flat fee and estimate how long it should take each month, don't be surprised if it usually takes you longer than expected! Of course, this depends on the client, some clients are so organised they will make it a simple task for you, whereas with others you may regret you every offered to do it for them!!

Hope this helps.

Hi Stuart

In addition to Richards excellent reply - I submit the submissions to HMRC for my clients and this is easily done online.

The submissions have to be done monthly, but the payments, if small, can be paid quarterly as with the PAYE.

If you use other payroll packages, you may find that they can produce the pay statements for you. I use Moneysoft, and this is excellent for professional looking supplier CIS statements and end of month reports.

If and when you're recording the CIS taken from your client by their customer - classed as CIS Suffered (when your client is acting as a Subcontractor) don't forget to record this as a current assett

If and when you're recording the CIS that is deducted from your clients subcontractors (when your client is acting as a Contractor) don't forget to record this as a liability

Good Luck - Hope this helps.

Carol

Hi Stuart

Yes that's correct - got it in one  

I've just double checked the 'behind the scenes journal' in QuickBooks to make sure this is correct - I get a bit complacent with which are my debit and credits with QuickBooks!

Carol