untied and the Construction Industry Scheme (CIS)

untied supports subcontractors using the CIS.

The basics

The Construction Industry Scheme (CIS) is a mechanism for construction sub contractors to pay tax as they go. Effectively you receive less during the year, but it means that a lot of the tax is paid (or you could get a refund).

It's all managed through a contractor deducting 20% from the total (or "gross") amount the sub-contractor has earned - the tax they take off this way is paid to HMRC against the sub-contractor's name. There is no deduction for materials that have been bought.

The contractor will tell you how much is deducted.

Is this the same as the tax I need to pay at the end of the year?

The calculation won't exactly match the actual tax due (this is done at the end of the year), but is a mechanism for paying as you go.

Recording this in untied

The steps below will help you to record two things:

• The correct income
• The correct tax that has been deducted (effectively this is a credit that HMRC will set against what you owe them - and you could be due a repayment)

The method that you'll use will depend on whether you are in Making Tax Digital or not.

In MTD

Note that if you have an accountant or adviser, follow the approach they want you to take - that will help you and they know what is going on.

The simplest option - deal with CIS at the end of the year

During the year

• Tag the income you receive (ie the cash you get) as business income

At the end of the year - adjust for the CIS deductions

• Find the CIS deductions in untied and check that the numbers are right
• Add the total deductions as a manual transaction for money in and tag it as business income (we suggest using 31 March as the date for it in the tax year)

That's it ... everything else will flow through and untied will take account of the deductions already made

Other option - work it out as you go

During the year

• The other option is to gross up during the year, and to use custom tags to help you keep a record of things
• See 🎥Advanced and multiple tagging of transactions in "untied" and 🎥Custom tags in "untied"

At the end of the year - adjust for the CIS deductions

• You will still want to find the CIS deductions in untied and check that the numbers are right as the numbers shown for deductions will go into your calculations

Finding CIS deductions in untied in MTD

1. Navigate to Making Tax Digital > Other Income Sources > Choose the tax year > Scroll down and expand the CIS deductions section
2. One expanded, check the numbers and especially look for the total deductions number
3. After the end of the tax year you can also add any deductions that have not been properly made (but check with the contractor why not!)

Not in MTD

If no CIS deduction has been made

This is easy - just tag what you receive as business income

If a CIS deduction has been made

You need to make sure the total income is the value BEFORE the CIS deduction was made. Effectively you need to "gross up" what you receive.

Example

You are a subcontractor earning £100. You are paid £80. The contractor deducts £20 and pays it to HMRC. They also report to you what has been deducted (£20).

In this case you need to make sure your income in untied is recorded as £100.

How to gross up income

There are various ways to do this, depending on how you enter your income and whether you are using the browser or not.

If you are entering your transactions manually

Just enter the transaction for your income as a total - ie before the CIS deduction. In the example this would be £100 - and tag this as business income.

If you have linked bank accounts - in untied Pro in the browser

Double click on a transaction (or press edit), then select the partial claim button, toggle this to percentage, and mark it at 125% (this will gross things up for you).

Alternatively you can partially claim by amount and enter the full amount.

Income received against which CIS deductions have been made

We'll use the example where you are a subcontractor earning £100. You are paid £80. The contractor deducts £20 and pays it to HMRC. They also report to you what has been deducted (£20).

In untied:

1. The money received (£80) is tagged as "business income" - (do not tag it as salary or enter it in employment: you are self-employed), chose to allocate by percentage and change this to 125% - this will claim £100 as the total income

(Alternatively you can allocate by amount and manually enter the total of the invoice)

2. ALSO IMPORTANT: You don't want to pay tax which has already been taken off. As we have identified, the deductions for the year (£20 in this example) will be reported to you by the contractor. Enter this number on the business income (self employment) profile screen under "Total Construction Industry Scheme (CIS) deductions taken from your payments by contractors".

In the untied mobile app this page appears when a wizard is triggered, or by navigating to Profile > Income > Business > More options

In untied in the browser you can find this under Tax forms > Self employment > More options. Remember to hit save!

Income received against which no CIS deductions have been made

This is to be entered in untied as any business income, ie tag the income as it comes in as Business Income.