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If you're a contractor under the Construction Industry Scheme (CIS) there are certain rules you'll need to follow. For example, you have to tell HM Revenue & Customs (HMRC) each month about all the payments you've made to your subcontractors within the scheme. You do this by making a monthly return.
To help HMRC check you're making your monthly returns correctly you're expected to keep records of your payments to subcontractors. You have to keep these records for a certain length of time so that HMRC can check them when it needs to.
This guide will help you if you're a contractor who needs to make monthly CIS returns. It explains how to go about making your return and tells you what happens about late returns, errors and months when you haven't paid any subcontractors. It also gives a basic overview of the records you must keep.
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To make your monthly returns you'll need to get hold of the right paperwork - or software - and have the right information to hand so you can fill in the return. Then you'll need to send it back to HMRC on time.
HMRC recommend making your monthly returns electronically as this is the easiest and most efficient method. To do this you'll need one of the following:
If you want to send HMRC your monthly returns online you'll need to register for its CIS Online service. Once you've done this you'll be able to send your return almost instantly through its website any time of the day or night.
You'll also be able to do this if you want to use commercial CIS software. You'll need to choose software that can work with HMRC's systems. You can see a list of CIS software that HMRC has tested on its website.
If you're a large contractor with a lot of subcontractors you might decide to use EDI. You'll need to register for EDI - if you haven't already - and set up your systems to use this method.
Once you start making your returns online, regardless of which method you choose to do this, HMRC will stop sending you paper returns.
When you register with HMRC it will send you a contractor pack that includes a blank copy of form CIS300 - the monthly return form. Once you're registered HMRC will send you a paper return towards the end of each tax month. A tax month starts on the sixth day of one month and ends on the fifth day of the following month.
HMRC will save you some time by filling in the returns sent to you with some of the information it has already got about your business. Once HMRC knows about the subcontractors you use it will save you more time by 'pre-populating' the return forms with details of subcontractors you've recently verified or included on a return.
However you choose to file your monthly returns, you'll also need to have the right information to hand when you fill in each return.
To make your monthly return by post you'll need to send it in good time to:
Construction Industry Scheme
Whatever method you use to make your monthly returns, the first thing you should do each month is check any pre- populated information HMRC has put onto the form. You'll need to:
Once you're happy that the details are complete and correct, you'll need to:
Details of payments in the month to all of your subcontractors must be included on the return, whether they are paid gross or under deduction.
The return includes a declaration that your subcontractors are properly self-employed and were not taken on under terms that would make them employees. It also includes a declaration that you verified all the subcontractors on the return if you needed to. When you're happy that everything's correct, sign the form where you're asked to if it's a paper one or confirm it if it's electronic.
Your monthly return must always reach HMRC no later than 14 days after the end of the tax month it's for. This means the return must get there no later than the 19th day of each month.
For example, if you're making a return to cover payments you made in the tax month from 6 May to 5 June, it must reach HMRC by 19 June.
Make sure you always get your returns in on time. If you don't, you'll get a penalty. Send HMRC your return in good time even if there are still some issues about it that you're discussing.
If you're making a paper return, be sure to:
Sometimes, the deadline for sending your return may coincide with a holiday period. These are the possible ways of dealing with this:
From time to time you might have a month when something unusual happens with your monthly return.
If you're a CIS contractor you have to make a CIS return every month - even if you didn't pay any subcontractors during the last tax month. If this happens, you have to make a 'nil return'. A nil return is not a return stating that you have only paid gross subcontractors in the month – it's a return stating that you have paid no subcontractors at all. If you normally send in a paper return, just fill in the section for nil returns and send it to HMRC as normal.
If you normally make your returns electronically you can still use this method to make a nil return.
Alternatively, you can also make a nil return by calling HMRC's CIS Helpline. HMRC will be unable to give you a confirmation number but the call will be voice recorded.
If you have a PAYE (Pay As You Earn)/National Insurance Contributions (NICs)/CIS scheme and will not be making any PAYE/NICs/CIS payment for any tax month or quarter, you must let HMRC know that the month or quarter will be a nil payment declaration by using the link below. You will need to do this before the payment due date to avoid being issued with a payment reminder.
If you know you're not going to be paying any subcontractors for a while you should let HMRC know. HMRC can stop sending you monthly return forms for a period of up to six months. But whenever you do start paying subcontractors again you must be sure to send HMRC a monthly return immediately when it is due to avoid being charged a penalty. Although you have told HMRC about a period of inactivity’ you must still tell HMRC that no payments are due for every month that you won’t be making payments to HMRC.
If you don't get your monthly return to HMRC by the deadline you'll get an automatic £100 penalty. If you don't then send in your return for some time you’ll get more penalties.
You'll need to make nil returns on time too to avoid a £100 penalty.
If you make a mistake on a paper return before you send it in, just put a line through it and then put in the right information.
It's easy to correct mistakes you make before you submit a return online - just delete whatever's wrong and put in the right details.
If you realise you've made a mistake on your return after you've sent it, what you need to do next depends on the type of mistake it is. Sometimes you'll need to contact HMRC to get it sorted out, but at other times it may be possible to sort things out between you and your subcontractor. If you need to contact HMRC about a mistake on your return call the CIS Helpline as soon as possible.
You'll get more information about how to deal with different types of mistake in HMRC's guide to sorting out monthly return and payment errors under CIS.
If you're a construction industry contractor HMRC will expect you to keep certain records. You'll need to keep details of:
HMRC will check these records from time to time - just like it checks employers' PAYE records.
You must keep your records for at least three years after the end of the tax year they're for. If HMRC asks to see them you'll need to make them available and provide any facilities needed to look at them. HMRC may ask you for full sized copies.
You can archive your records on an imaging system like microfiche as long as you keep an unchanged image of the originals.