Why this is the deadline that hurts #
Most compliance deadlines in a trade business are attached to a job. CIS is attached to a calendar, which is a different kind of pressure. It arrives every month whether or not the work is going well, it does not care that the site flooded, and it lands on whoever does the books, who in a firm of fifteen people is usually also doing three other jobs.
the admin and running the business side
He named VAT and CIS specifically. That is a fair summary of where the monthly load sits.
The deadline and the penalties #
GOV.UK is precise about both.
by the 19th of every month following the last tax month
The return declares that the listed subcontractors are not employees, and getting that employment status wrong carries a penalty of up to £3,000.
| How late | Penalty |
|---|---|
| 1 day | £100 |
| 2 months | £200 |
| 6 months | £300 or 5 per cent of the CIS deductions, whichever is higher |
| 12 months | £300 or 5 per cent of the CIS deductions, whichever is higher |
| Over 12 months | Up to £3,000 or 100 per cent of the CIS deductions, whichever is higher |
Penalties can be appealed within 30 days of the notice, through HMRC's online service or in writing.
Where the work actually is #
Filing takes minutes. What takes the month is the state the figures are in on the 15th.
Runs on rules
- Verifying a new subcontractor before paying them, which has a defined process
- Knowing which subcontractors on this month's return are unverified, which is a list comparison
- Calculating the deduction on each payment, which is arithmetic at a set rate
- Collecting invoices from subcontractors who have not sent one, which is rules to detect and judgement to chase
- Issuing payment and deduction statements
- Filing the return, which stays your legal responsibility
Needs a person
- Determining whether someone is a subcontractor or an employee, which is serious and carries a penalty
- Splitting labour from materials on a mixed invoice, where the invoice is not itemised
Where the invoice is itemised, that split runs on rules like everything opposite.
The unverified subcontractor and the invoice that never arrived are the two that turn the 18th into a bad evening. Both are detection problems: something that should be present is absent, and nobody finds out until somebody sits down to assemble the return.
The reverse charge sitting on top #
Since the VAT domestic reverse charge for building and construction services came in, the invoice itself changed shape. HMRC guidance describes the charge as applying to most supplies of building and construction services between VAT registered businesses in the UK that are reported under the Construction Industry Scheme.
The services the reverse charge covers
Standard and reduced rate services, including construction, alteration, repair, demolition, installation of building systems, internal cleaning during construction, and painting and decorating.
The customer accounts for the VAT rather than paying it to the supplier. The guidance references 1 March 2021 as the operative date.
The practical consequence for an office is that whether a given invoice carries VAT now depends on facts about the customer and the work, not just on your own VAT status. That is a rule, and rules can be applied consistently. What it needs is the facts to be recorded somewhere when the customer is set up, rather than recalled by whoever raises the invoice.
HMRC's own preparation advice is that businesses should make sure their accounting systems can deal with the reverse charge and understand the cash flow implications, which is worth repeating because the cash flow effect is real and separate from the admin one.
What to look at before changing anything #
Take the last three returns. For each one, note the date the figures were actually complete, and count the chases it took to get there. If the gap between "month end" and "figures complete" is more than a couple of days, the deadline is not your problem. Collection is.
Getting paid covers the same chasing pattern on the money coming in, and parts, supplier orders and receipts covers the purchase side and what Making Tax Digital adds to it. To count the hours first, start with the cost of admin time calculator.