Another construction business owner asks:
I use Xero for my books and I know you can use it to operate CIS. How do I verify subbies in Xero?
Acumenica answers:
To verify CIS (Construction Industry Scheme) subcontractors in Xero, follow these steps. This process ensures you're compliant with HMRC regulations and that the correct tax is deducted from payments made to subcontractors:
1. Enable CIS in Xero Go to Settings: Click on your company name in the top left and select “Settings.” Enable CIS: Under the “Features” section, click on “Financial Settings,” then scroll down to “Construction Industry Scheme (CIS)” and enable it. Enter your company’s CIS details, such as your HMRC employer reference number.
2. Add Subcontractors to Xero Go to Contacts: Navigate to the “Contacts” tab, then click “Add Contact.” Create a Subcontractor Contact: Enter the subcontractor's details (name, address, etc.). Mark as a Subcontractor: After entering their details, select "Options" at the bottom and tick the box that says "Is CIS Subcontractor."
3. Verify Subcontractors with HMRC CIS Tab: Once you've marked a contact as a subcontractor, Xero will automatically include them in your CIS list. Go to the “Business” tab in Xero and click on "CIS." Verify Subcontractor: In the CIS section, click on "CIS Returns" and then "Add Subcontractor." Enter HMRC Details: You'll be prompted to enter the subcontractor’s verification number, UTR (Unique Taxpayer Reference), and National Insurance number (or company registration number for businesses). Verify with HMRC: Once the information is entered, Xero will submit the details to HMRC to verify the subcontractor. HMRC will confirm the subcontractor’s CIS tax status (gross payment, 20%, or 30% tax deduction).
4. Record Verification Status Verification Results: After HMRC responds, Xero will update the subcontractor’s status within the system, indicating their tax deduction rate (0%, 20%, or 30%). Store the Results: Xero will store this information under the subcontractor’s profile, and you'll be able to see their verified status in the CIS section.
