CIS and Making Tax Digital: What Subcontractors Need to Know

If you work as a subcontractor in construction, your contractors probably take Construction Industry Scheme (CIS) deductions from your pay. Under Making Tax Digital for Income Tax those deductions still count, and they need to be recorded properly alongside your income.

A quick CIS refresher

Contractors deduct tax from what they pay a subcontractor and send it to HMRC. The rate depends on your status:

• 20% if you are registered for CIS.
• 30% if you are not registered.
• 0% if you have gross payment status and are paid in full.

The deduction normally applies to your labour, not to materials you buy and charge for. Your payment and deduction statement from each contractor shows the split.

How CIS shows up in your records

Record your income at the gross amount, which is the amount before the CIS deduction. Then record the deduction separately as tax already paid. That way your income figure is right and the tax suffered is credited against what you owe. With AppyTax you choose the CIS rate when you categorise the subcontractor income, and the deduction is worked out for you.

What this means each quarter

Your quarterly updates include the gross income from your CIS work. The deductions you've suffered are brought into the year-end calculation, which is where the tax already paid is set against your total bill. Keep every contractor statement so your records can be checked against them.

Common CIS slip-ups

• Recording only the net amount received, which understates your income.
• Forgetting to log the deduction, which means missing out on tax already paid.
• Mixing materials and labour so the wrong amount is treated as deducted.
• Losing monthly statements from contractors.

Keep it simple

Photograph or email each contractor statement as it arrives and AppyTax records the income and works out the deduction. Subscribe and keep your CIS records ready for every quarterly update.