AP Construction Industry Scheme

NOTE CIS is only applicable to clients reporting their accounts in the United Kingdom.

NOTE As of the 6th April 2007 changes in the CIS scheme will mean that the existing types of CIS groups will be replaced. Click here for further details.

Overview
CIS Set up
CIS Data Entry Implications
CIS Processes
Transmitting CIS Data Via EDI

Overview

Inland Revenue (IR) assesses tax against miscellaneous income. IR requires you, dependent upon certain conditions, to withhold and report the payments you make to subcontractors for services rendered. To report payments, you must provide the IR with Construction Industry Scheme (CIS) information on various media, usually hardcopy forms or magnetic tape. IR strictly regulates how you provide this information. Withholding requires that you deduct a percentage of the payments you make to suppliers. e5 AP supports reporting and withholding of CIS information.

CIS legislation requires subcontractors to be registered with the IR, which issues Certificates (entitling subcontractors to exemption from deductions and vouchers, which are completed for all payments made under the scheme) or Registration Cards as appropriate depending on the size and length of trading history of the subcontractor.

Subcontractors' Tax Certificates

All eligible subcontractors should have a Gross Payment Certificate.

Subcontractors who are not eligible for a certificate should have a Registration Card. Subcontractors who are not eligible for either a certificate or a registration card cannot participate in the scheme and cannot receive any payments for construction work, either net or gross.

There are three types of exemption certificates under the CIS scheme:

CIS5. Construction Certificate
CIS5P. Construction Certificate Partnership
CIS6. Subcontractor Certificate

CIS5 and CIS6 certificates both have a certificate number and an expiry date. CIS6 certificates also have a National Insurance number. Certificates are valid for one or three years.

Subcontractors' Registration Cards

All subcontractors who receive taxed payments, that is who do not hold CIS5 or CIS6 certificates, must have a Registration Card. Subcontractors must present their registration cards to the contractor before they are paid so that the Taxed Payment Vouchers CIS25 can be completed with details taken from the card.

There are two types of registration cards under the CIS scheme:

CIS4(P). The Permanent Registration Card displays a card number and a National Insurance number for the subcontractor.
CIS4(T). The Temporary Registration Card displays a card number and an expiry date. Temporary registration cards last three months and a maximum of three consecutive temporary cards will be issued.

Subcontractors' Vouchers

Three types of voucher can be issued under the CIS scheme:

Gross Payment Vouchers CIS24. These vouchers are issued to all subcontractors holding a CIS6 certificate. Each payment received must be acknowledged by a voucher given to the contractor. The contractor adds personal information to the voucher, returns one copy to the subcontractor and sends one copy to the IR.
Construction Gross Payment Vouchers CIS23. These vouchers are issued to contractors for completion when making payments to construction certificate CIS5 holders. One copy of the voucher is sent to the IR; the subcontractor does not receive a copy.
Taxed Payment Vouchers CIS25. These vouchers are issued to contractors. A voucher must be completed monthly showing details of all payments to a subcontractor in that month. The subcontractor and the IR each receive a copy of each voucher; vouchers are submitted to the IR monthly. The subcontractor registration details and/or National Insurance number must be quoted on these vouchers.

No payment in respect of construction work may be made to any subcontractor without a valid certificate or registration card.

Contractors retain one copy of each voucher. Voucher submissions to the IR should be made by the 19th of each month. Information from the vouchers is also required on an annual return.

Deductions from Payments to Subcontractors

Contractors must make deductions from payments made to subcontractors holding valid registration cards. Deductions are not taken from payments made to subcontractors holding exemption certificates.

A contractor must complete a CIS25 Taxed Payment Voucher with the subcontractor's details for each such payment made.

CIS Set up

You set up CIS processing by activating controls on screens within e5 AP. The following table lists the fields applicable to CIS processing and the screens on which they are located. Ensure that you enter the following fields according to your company's specifications.

Screen	Fields
AP Company Controls screen MGAB	Withholding Type Indicator Tax Authority Supplier Tax Rate No. of Days to Tax Prompt Tax Contractor Number Tax Contractor Name
Supplier Purchasing Controls screen MPBD.	CIS Indicator Registration Card Type CIS Cert/Reg Card No CIS Expiry Date National Insurance No. CIS Pay Determinant
Line Detail Enter Invoice screen MGBC.	If the detail line you are creating or editing concerns the labour element of any document and the supplier is a CIS subcontractor, then enter 1 in Withhold Indicator. The system applies the defined CIS rate against this labour element, depending on the status of the subcontractor.

CIS Data Entry Implications

The following changes have been made to reflect the changes for the CIS scheme.

On the AP Company Controls screen MGAB, Tax Contractor Number has been extended to 13 characters to accommodate the longer codes used in the new scheme.
The Supplier List - Extended Selection screen MPBA has been changed to include the new registration cards as well as certificates. New fields have been added, such as Registration Card Type, to select suppliers based on CIS controls.
The CIS W/Hold format of the Supplier Purchasing Controls screen MPBD has changed to reflect the replacement of the CIT 714 certificates with CIS certificates and Registration Cards. The CIS5 Construction Certificate replaces the 714C and the CIS6 Subcontractor Certificate replaces both the 714I and 714P. There is no CIS equivalent for the 714S.

Registration Cards have been introduced for suppliers who cannot meet the new criteria for the award of an exemption Certificate. Registration cards may be Permanent CIS4(P) or Temporary CIS4(T). Each Temporary Registration Card is valid for 3 months.

New fields have been added to the screen to accommodate the additional information, such as National Insurance Number, that appears on the certificates and cards.

A maximum of 3 consecutive Temporary Registration Cards will be issued to a subcontractor by the IR. No provision has been made on the CIS W/Hold format of Supplier Purchasing Controls screen MPBD to record the number of temporary cards a supplier has had; if this information is required then it should be recorded on the User Data format of Supplier Purchasing Controls screen MPBD.

For Payment Processing, the effective payment date varies according to the payment method. For cash, the payment date is the date on which the cash is given to the subcontractor; for checks, the payment date is the date on which the cheque is issued; for BACS, the payment date is the date on which the funds arrive in the recipient's bank account.

CIS Processes

The following processes encompass the CIS reporting process:

GM2. PL CIS Reports. Produces the monthly and yearly tax reports.
GM3. CIS Monthly Expiry List. Produces the monthly expiry list.

Transmitting CIS Data Via EDI

To transmit CIS data via EDI to the IR, you will need to click the CIS EDI check box on the Purchasing format of the System Controls screen MAAB. You also need to enter EDI ID on the Withholding format of the AP Company Controls screen MGAB.

NOTE The menu path shown is the default for the system. Your company may have customised menu options, so the path shown may not be accurate. Please contact your system administrator for details.