Set up a contact as a subcontractor for CIS

Set up new or existing contacts as subcontractors so CIS can be deducted from invoices.

  • Verify the status of a subcontractor with link to HMRC website.
  • Set a default CIS ledger account on a contact, to make sure CIS is always deducted automatically and prevent errors.
  • Choose to allow reverse charge VAT to be applied to relevant transactions created for a contact.

Once a contact is set up for CIS it can't be disabled. If your contact is no longer a contractor or subcontractor, you can still send invoices without CIS deductions. Just use the standard ledger accounts so that CIS deductions aren't applied. .

What you need to know

  • Activate CIS in the settings before you set up CIS on your contacts.
  • Set up contacts set up as subcontractors to allow CIS to be deducted from invoices. The required ledger accounts are only available to CIS contacts.

  • Set VAT registered contacts to use reverse charge VAT, where applicable, so VAT can be applied correctly to their invoices.
  • Verify your subcontractors are registered for CIS and confirm their deduction rate (so the correct values are deducted when you create an invoice). Before you can pay a new subcontractor, you must verify they’re registered with HMRC.
  • Reverify a subcontractor if they've not been included on a CIS return in the current or last two tax years.

  • Existing invoices for an existing contact are not automatically updated to apply CIS deductions.
  • Once a contact is set up for CIS it can't be disabled. If your contact is no longer a subcontractor, you can still send invoices without CIS deductions. Just use the standard ledger accounts so that CIS deductions aren't applied, and remove the reverse charge option so invoices are created without being able to apply reverse charge VAT.
  • You can only set CIS on contacts with a UK address and currency set to Pound sterling.

  • Consider setting the default ledger account to a CIS Labour account. This is a good way to prevent errors, as the CIS ledger account is always selected when creating an invoice.
  • When creating or editing CIS subcontractor (supplier) records, the following fields are mandatory: 
    • Registered CIS Name
    • Registered CIS Rate
    • Organisation Type
  • A subcontractor must have at least one of these:

    • Unique Taxpayer Reference (UTR)

    • National Insurance number (NINO)
    • Company Registration Number
  • A UTR is mandatory where the deduction rate is 0% or 20%

  • A Verification Number is mandatory where the deduction rate is 30%

Set up a contact as a subcontractor (supplier)

Once a contact is set up for CIS it can't be disabled. If your contact is no longer a contractor or subcontractor, you can still send invoices without CIS deductions. Just use the standard ledger accounts so that CIS deductions aren't applied. .

  1. From Contacts, select Suppliers, then New Supplier.

    For an existing contact, select the pencil icon next to contact.

  2. For new contacts, add the contact details as required. For more information see Create a customer contact.
  3. From the CIS tab:
    1. Registered CIS Name - This is name the subcontractor has registered with HMRC. In the case of sole traders this would be their first and surname. For partnerships it would be the partnership name.
    2. Deduction Rate - This should be the rate as verified by HMRC. Used to apply CIS deductions on purchase transactions. If the rate changes, this should be updated before entering any new purchase transactions to ensure the correct tax treatment is applied.
    3. Unique Taxpayer Reference  - The UTR for the subcontractor. For partnerships enter the partner UTR.

      Not mandatory but should be included where known as will help to speed up the processing of the CIS 300 Return.

    4. Verification No. - The Subcontractor's HMRC CIS Verification Number.

      Not mandatory but should be included where known as will help to speed up the processing of the CIS 300 Return.

    5. Organisation Type - Select from: Sole Trader, Partnership, Limited Company or Trust.
    6. National Insurance No. - The Subcontractor's National Insurance Number. It's 9 characters and made up of letters and numbers in the following format: QQ 12 34 56 A.

      Not mandatory but should be included where known as will help to speed up the processing of the CIS 300 Return

    7. Company Registration No. - For Partnerships and Limited Companies enter the Company Registration Number. It's 8 numbers, or 2 letters followed by 6 numbers.

      Not mandatory but should be included where known as will help to speed up the processing of the CIS 300 Return.

  4. From the Account Details or Options tab

    1. Set the Account Default to a CIS Labour Expense ledger account.

      For existing contacts, this is on the Options tab.This helps prevent errors and ensure CIS deductions are made on invoices, as this ledger account is set automatically when invoices are entered.

      If you don’t want to set a default, just manually select a CIS ledger account when you create the invoice. CIS ledger accounts are only visible to CIS registered contacts.

    2. VAT Reverse Charge - For VAT registered contacts this allows reverse charge VAT to be applied to appropriate invoices. More about reverse charge and CIS.
  5. Save the contact.

Verify a subcontractor with HMRC

Before you pay a subcontractor you must verify they are registered for CIS with HMRC and confirm their deduction rate (so the correct values are deducted when you create an invoice).

Any subcontractor that hasn't been included on a CIS return in the current or last two tax years must be re-verified.

  1. From Contacts, select Suppliers.

  2. Select the subcontractor,
  3. From the CIS tab, then pencil icon.
  4. Select Verify Details with HMRC. This takes you to Gov.uk where you can confirm the subcontractor is registered and confirm their deduction rate.

    You'll need to sign in to the Government Gateway.

    Make sure you have the following information handy:

    • Your Unique Taxpayer Reference (UTR).
    • The reference number for your HMRC accounts office.
    • Your HMRC employer reference.
    • Your subcontractor’s:
      • UTR.
      • National Insurance number if they’re a sole trader - you cannot verify temporary numbers, which start with ‘TN’ or 2 digits.
      • Company name, company UTR and registration number if they’re a limited company.
      • Nominated partner details, trading name and partnership UTR if they’re a partnership.

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