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Function documentationConstruction Industry Scheme (CIS)

 

Country Version United Kingdom comes with functions for monitoring all payments in the construction industry in which contractors and subcontractors must comply with the corresponding taxation requirements.

Under the terms of Construction Industry Scheme (CIS), the HM Revenue and Customs (HMRC) requires you (as the contractor) to track and report all payments made to construction companies, and in some cases to withhold tax. Its aim is to improve the level of compliance by construction businesses with their tax obligations. The types of businesses covered by CIS are defined by HMRC.

If you are a contractor and your business is included in the CIS business types, you must first register for CIS as a contractor with HMRC. Before you pay the subcontractor for the construction work, you must check whether the subcontractor is registered in the system of HMRC, and if so, you must verify the subcontractor through the Government Gateway. During the verification process, HMRC specifies the tax status of the subcontractor that determines the rate of deduction (if any).

You, as a contractor, must complete and submit a monthly return of all payments made, including nil returns.

If you are a subcontractor, you are required to register for the new CIS only if you did not have a tax certificate or registration card for the former CIS that was valid on April 5, 2007. If you register for the new CIS, HMRC defines your tax status and informs the contractor about it during the verification process. If you register for self-assessment, HMRC provides you with a unique taxpayer reference (UTR) number that your contractor must use for the verification.

Prerequisites

This product enables you to set up Exchange Infrastructures (XI) in the Government Gateway for both the vendor verification process and the e-filing of monthly returns between your SAP system and the system of tax authorities. Proceed as follows:

  • To verify vendors, implement SAP Note 1173466, and configure the XI by following the instructions given to you in the document attached to the Note.

  • To file your monthly return, implement SAP Note 1047161, and configure the XI by following the instructions given to you in the CIS_300_XI_Configuration document attached to the Note.

Activities

Customizing

In addition to the generic Customizing activities for extended withholding tax, carry out the activities specific to the United Kingdom as described in Customizing.

Master Data

You must enter the required information as described in the vendor master data.

Business Transactions

The tax authorities require you to send them the requested data of your subcontractors for matching and verifying them in their system before you pay subcontractors for construction work.

Tax Returns

You are required to submit your monthly tax return with CIS300 Return Filing through the Government Gateway.

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