Understanding Construction Industry Scheme

What is CIS?

CIS requires:

• Contractors deduct tax from payments
• Deductions sent to HMRC
• Rates: 0%, 20%, or 30%
• Applies to construction work
• Requires proper documentation

Who Needs CIS?

Contractors

• Pay subcontractors
• Must deduct tax
• Submit returns to HMRC
• Maintain records

Subcontractors

• Receive payments
• Get deductions made
• Claim deductions back
• Submit returns

CIS Deduction Rates

Gross Payment (0%)

• No deduction
• Verified subcontractor
• Verified with HMRC
• Requires verification

Standard Rate (20%)

• 20% deduction
• Most common rate
• Standard subcontractors
• Verified status

Higher Rate (30%)

• 30% deduction
• Unverified status
• Default for new
• Until verification

How CIS Works in Billo

Client Setup

• Enable CIS for client
• Set payment status
• Add UTR number
• Configure NINO

Invoice Creation

• Enable CIS toggle
• Rate auto-populates
• Categorize line items
• CIS calculates automatically

CIS Breakdown

• Labor value shown
• Materials value shown
• CIS deduction amount
• Net payment due

CIS Calculations

Labor Items

• CIS deduction applies
• Rate based on status
• Calculated automatically
• Shown in breakdown

Materials

• No CIS deduction
• Excluded from calculation
• Shown separately
• Included in total

Other Items

• Typically no deduction
• Depends on nature
• Check HMRC guidance
• Verify with accountant

Compliance

Record Keeping

• Maintain CIS records
• Keep invoices
• Document deductions
• Submit returns

HMRC Requirements

• Monthly returns
• Payment deadlines
• Verification checks
• Proper documentation

Best Practices

Setting Up

• Verify client UTRs
• Confirm payment status
• Keep records updated
• Check HMRC status

Invoicing

• Categorize correctly
• Use correct rates
• Include breakdown
• Document properly

Compliance

• Follow HMRC rules
• Submit returns on time
• Keep proper records
• Seek professional advice

CIS support helps UK construction businesses stay compliant!