HMRC have issued recent guidance on changes to claiming subcontractor Construction Industry Scheme (CIS) deductions as part of their January 2022 updates.
In order to claim CIS deductions as a subcontractor on your Employer Payment Summary (EPS), your business must be a limited company operating within the construction industry. If your company is not a limited company, you should report the deductions on your Self-Assessment (SA) Tax Return Instead of using the EPS to claim them.
From April 2022, HMRC are introducing an additional field on the EPS. Limited companies must enter their Corporation Tax Unique Tax Reference (CT UTR) or COTAX Reference number in that field to claim credit for these deductions.
Any EPS submissions which include a claim for CIS deductions, but don't include the CT UTR will be rejected. if you cannot satisfy the new CT UTR validation but need to report anything else, you must remove the claim for CIS deductions and resubmit your EPS.
if you have last or cannot find your CT UTR, you can request your Corporation Tax UTR online. HMRC will send it to the business address registered with Companies House.
The Construction Industry Scheme
The Construction Industry Scheme (CIS) is a tax deduction scheme which involves tax being deducted at source from payments which relate to construction work. CIS does not apply to payments made to employees, since payments to employees are covered by the Pay As You Earn (PAYE) system of deduction of tax at source.
Although the burden of operating CIS is mainly that of the person making the payments, the rate at which tax is deducted depends on the status of the recipient.
You must register as a contractor with the Construction Industry Scheme (CIS) if:
you pay subcontractors to do construction work.
your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment.
You may be a sole trader, in a partnership or owner limited company.
If you're not sure if you need to register, you can check the rules of the Construction Industry Scheme or contact us for further information.
Reporting to HMRC: EPS
Use your payroll software to send an Employer Payment Summary (EPS) as well as a Full Payment Submission (FPS) if you:
Reclaim statutory maternity, paternity, adoption, parental bereavement or shared parental payments - even if you got an advance payment from HM Revenue and Customs (HMRC) to cover them.
Claim the Employment Allowance – do this once every tax year.
Can reclaim Construction Industry Scheme (CIS) deductions as a limited company.
Claim National Insurance contributions holiday for previous tax years.
Pay the Apprenticeship Levy if you, or employers you're connected to have an annual pay bill of more than £3 million.
Send and EPS instead of an FPS if you’ve not paid any employees in a tax month.
EPS deadlines
Send an EPS by the 19th of the following tax month for HMRC to apply any reduction (for example statutory pay) on what you'll owe from your FPS.
The tax month starts on the 6th.
Sending an EPS
To complete and send the EPS, follow your payroll software’s instructions. HMRC has guidance on what to put in each field on an EPS.
Use HMRC's Basic PAYE Tools if your software cannot send EPS reports.
After you've sent your EPS
Once you've sent your EPS, you can:
View what you've claimed and the balance of what you owe on your HM RC online account within 2 days (or by the 14th if you sent the EPS before the 11th).
Pay HMRC by the 22nd (or the 19th if paying by post).
If you made a mistake in your EPS
You should correct any errors in your EPS as soon as you find them.
If you do not pay any employees in a tax month
Do not send an FPS. Send an EPS by the 19th after the tax month you did not pay any employees. The tax month starts on the 6th.
HMRC has guidance on what to put in your EPS if you've not paid anyone.
If you do not send an EPS, HMRC may :
Send you a notice through PAYE Online.
Estimate how much you should pay.
Give you a penalty.
If you do not pay anyone for a longer period
You can tell HMRC up to a year in advance that you'll not pay any employees . To do this, enter dates in the "Period of inactivity" fields in your EPS.