Save time on managing your CIS deductions

The Construction Industry Scheme (CIS), was set up by HMRC to make sure contractors and subcontractors are paying the tax and National Insurance they owe.

Contractors deduct money from a subcontractor's wages at source, then make a monthly report to HMRC and pay the money that’s been withheld. If you're working as a contractor or subcontractor in the construction industry, your first step is to register with HMRC for CIS. This is optional for subcontractors, but if they're not registered they'll have to pay a higher rate.

The domestic reverse charge (referred to as the reverse charge) is a major change to the way VAT is collected in the building and construction industry. It came into effect on 1 March, 2021.

This means that customers receiving the service have to pay VAT due to HMRC instead of paying the supplier.

It only applies to individuals or businesses registered for VAT in the UK (although it does not apply to consumers).

• This affects you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

If you're a contractor, you'll need to review all your contracts with subcontractors to decide if the reverse charge will apply to the services you receive under your contracts. You'll need to notify your suppliers too.

If you're a subcontractor, you'll need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end user or intermediary supplier.

QuickBooks has two new VAT codes (20% and 5%) that customers can use to account for the VAT reverse charge. Once the code has been selected and the transaction is saved, QuickBooks will automatically account for the reverse charge and the VAT will be reflected on your VAT return; you do not need to amend or adjust your return.

If you are an existing customer and have enabled VAT and CIS, then you do not need to set up anything. You will only need to enable and select the VAT code to apply it to invoices or bills.

Once the VAT code has been selected and the transaction is saved, QuickBooks will automatically account for the reverse charge and the VAT will be reflected on your VAT return; you do not need to amend or adjust your return.