Meet the Construction Industry Scheme obligations with Xero

Construction workers

What is the Construction Industry Scheme?

Every construction business in the UK needs to adhere to tax rules and regulations set by the Construction Industry Scheme (CIS), applying to both contractors and subcontractors (anyone who does construction work for a contractor). Any business or individual who pays subcontractors for construction work is classed as a contractor under CIS and must register with HMRC before any construction work begins. After a contractor has paid a subcontractor, 20% of the payment is deducted and paid directly to HM revenue and customs on their behalf. This can be increased to 30% if:

  • You are not registered for CIS
  • The contractor cannot verify the subcontractor
  • You give the wrong name for your business

The scheme has the benefit of reducing tax avoidance and tax evasion, as well as helping subcontractors spread their income tax burden across the year in line with their income. There are a lot of tasks and calculations required to meet the government legislation, including:

  • Verifying the subcontractors
  • Registering for CIS
  • Submitting monthly returns to HMRC
  • Deducting payments
  • Sending monthly payments and deduction statements to contractors
  • Keeping records of all payments and deductions

However Xero can help to manage these.

Managing obligations with Xero

Invoices, bills, statements and returns are just some of the tasks involved in your business. We know it can be hard and time-consuming to ensure all calculations and deductions are done regularly and with no errors.

Xero is simple accounting software that helps contractors, subcontractors and accountants in managing CIS. Deductions from invoices and returns to the HMRC are processed automatically with the click of a button – keeping you in control of your payments.

Xero offers a wide range of online features and tools, such as:

  • Fast online invoicing and online payments options
  • Apps for inventory management, project management, time tracking and more
  • Xero dashboard to check on cash flow at any time
  • Mobile app to manage your business financials
  • Add all contractor and subcontractor information
  • Automate all CIS calculations
  • Automatically calculate CIS deductions before making payments
  • Automatically produce contractor monthly CIS Return in simple steps
  • CIS suffered reports
  • Payroll integration
  • And much more…

With accurate and efficient calculations, Xero can help you complete your business tasks quickly wherever you are, from offices to building sites.

Talk to Berley for more information

As Silver Champion Partners to Xero, we’re here to answer any questions you might have. To talk to us directly, give us a call on 020 7636 9094 or use our online form. You can also find out more about how Xero can apply to different aspects of your business here:

For more information about Xero, you can check out:

  1. The benefits of using Xero for your payroll
  2. The top 5 common questions about Xero
  3. How to get the most out of Xero
  4. Preparing your business for Making Tax Digital
  5. Cloud accounting: top user mistakes and how to avoid them
  6. Keep track of your projects with Xero
  7. Getting the most out of Xero with Berley