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CIS in Sage Sole Trader

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Summary

How the Construction Industry Scheme (CIS) works in Sage Sole Trader. It explains CIS deducted, how invoices show CIS amounts, and why this helps you keep your Income Tax figures accurate.

Description

What CIS means for you

CIS is a UK tax scheme for construction subcontractors. Under CIS, a contractor deducts tax from your payment and sends it to HMRC. These deductions count towards your tax and National Insurance bill.

NOTE:

CIS is only available in the paid Sage Sole Trader plan. 

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How CIS works in Sage Sole Trader

Sage Sole Trader helps you track work for contractors who deduct tax before they pay you. Your invoice shows the CIS rate, the amount deducted, and the net amount due to you. This makes it easier to see what you invoiced, what your contractor deducted, and what you received.

The CIS journey from invoice to bank:

  1. You create an invoice for the gross amount, including the CIS labour.
  2. Your invoice shows the CIS rate, the amount deducted, and the net amount due.
  3. Your contractor pays you the net amount.
  4. You mark the invoice as paid when the money arrives.
  5. Sage records the CIS deducted, and your turnover stays at the gross value.

     

NOTE:

CIS in Sage Sole Trader is for subcontractors who have tax deducted by contractors. You can’t use it to deduct CIS from payments to others.

Sage Sole Trader isn't suitable for CIS contractors. Contractors need to:

  • Verify subcontractors with HMRC
  • Calculate deductions
  • Submit monthly returns
  • Produce payment statements

These features aren't available in Sage Sole Trader. If you're a contractor, consider one of the following:

  • Sage Accounting (includes CIS)
  • Sage 50 Accounts (full CIS module)

For CIS compliance, go to GOV.UK.

When Sage records CIS deducted

Sage doesn't record CIS deducted when you create the invoice. Sage records it when you record the payment.

This keeps your records accurate, because the deduction only becomes final when the contractor pays you.

How CIS affects your Income Tax

Sage uses the gross invoice value for Income Tax reporting, including any CIS deducted. CIS deductions are advance tax payments, not a reduction in your income.

Your turnover is the gross value you invoiced, not the lower amount you received in your bank.

EXAMPLE:

You invoice a contractor £1,000 for labour. The contractor deducts 20% CIS, which is £200, and pays you £800. Your turnover for Income Tax is £1,000. The £200 counts towards your tax bill as an advance payment. The £800 is what reaches your bank.

Using bank feeds with CIS

If you use bank feeds, make sure you record each CIS payment once.

When you mark a CIS invoice as paid, Sage Sole Trader gives you a choice.

You can mark the invoice as paid without creating a money-in transaction. If you do this, Sage does not add a payment to Completed transactions. You can then record the payment when your bank feed pulls it through. The payment may appear in Drafts first. If Sage autocategorises the payment, it may go straight to Completed transactions. This records the payment once.

You can also mark the invoice as paid and create a money-in transaction. If you do this, Sage adds the payment to Completed transactions. Do not also complete the same payment from your bank feed. If the payment appears in your bank feed, delete it or leave it uncompleted.

If you complete both, Sage records the same payment twice. This duplicates your income and makes your records incorrect.

Keep your CIS statements

Keep your Payment and Deduction Statements. These help you check what your contractor deducted and compare it with your records.

Next steps

Use the related articles to complete your setup and day to day tasks: