For SMEs, CIS can be a complex scheme to understand and comply with. However, there are a number of things that SMEs can do to make the process easier.
- Register for CIS - The first step for SMEs is to register for CIS. This can be done online at the HMRC website. Once registered, SMEs will be given a CIS number.
- Verify subcontractors - Before making ANY payments to subcontractors, SMEs must verify that the subcontractors are registered for CIS. This can be done by checking the CIS Checker website.
- Deduct tax at source - When making payments to subcontractors, SMEs must deduct tax at source. The amount of tax to be deducted will depend on the tax status of the subcontractor.
- File monthly returns - SMEs must file monthly returns to HMRC with details of the payments they have made to subcontractors. These returns can be filed online at the HMRC website.
- Keep records - SMEs must keep records of all payments they have made to subcontractors. These records should be kept for at least six years.
CIS can be a complex scheme, but by following these steps, SMEs can make the process easier.
Benefits of CIS for SMEs
CIS can offer a number of benefits for SMEs, including:
- Ensuring that the correct amount of tax is paid. CIS helps to ensure that the correct amount of tax is paid by both contractors and subcontractors. This can help to protect SMEs from potential penalties from HMRC.
- Reducing the risk of fraud. CIS helps to reduce the risk of fraud in the construction industry. This is because it requires contractors to verify that subcontractors are registered for the scheme before making payments.
- Making it easier to manage cash flow. CIS can help to make it easier for SMEs to manage their cash flow. This is because the tax is deducted at source, which means that SMEs do not have to worry about collecting the tax from subcontractors.
In conclusion, CIS can be a complex scheme but by following the steps outlined in this blog, SMEs can make the process easier. CIS can offer a number of benefits for SMEs, including ensuring that the correct amount of tax is paid, reducing the risk of fraud, and making it easier to manage cash flow.
The next step
For more information, please contact Jake-Leanne Henderson on j.henderson@uhy-manchester.com, or your usual UHY adviser.
