Companies that have CIS deductions taken from their income as subcontractors should set these off against their monthly or quarterly payments to HMRC. Companies should reduce their PAYE/National Insurance contributions or CIS payments by the amount of CIS deductions taken from their incoming payments.
Only companies may use this arrangement. It is not available to individual subcontractors or partnerships.
CIS deductions taken in a pay period that cannot be fully set off against payments due to HMRC for that period should be carried forward and used for later pay periods within the same tax year.
When the CIS deductions available for set off in a pay period do not cover the whole of the company’s liability for that period, the company must pay over the balance by the normal payment date.
Companies need payment statements for all the CIS deductions taken from their income and should have received these from the paying contractor(s). But if the statements have not yet been received a company can still set off the CIS deductions against its monthly or quarterly payments.
Companies must keep a record of the amounts set off and can use the table at the following link: http://www.hmrc.gov.uk/manuals/cisrmanual/pdfs/cis132.pdf
When HMRC have received the company’s last Full Payment Submission (FPS) and Employer Payment Summary (EPS) due for the tax year, any CIS deductions that have not been set off during the tax year may be repaid. Or we may set them against any unpaid tax, depending on the amount involved.
For more guidance, go to www.hmrc.gov/uk/CIS or call us for advice.