Can I use accounting software for CIS submissions?

The Construction Industry Scheme (CIS) requires contractors to deduct tax from subcontractors and report those deductions to HMRC each month. Managing CIS can be time consuming, especially when calculating deductions, verifying subcontractors, and submitting monthly returns. Fortunately, modern accounting software can automate much of the process. This article explains whether you can use accounting software for CIS submissions, how it works, and what benefits it offers contractors and subcontractors.

Yes, you can use accounting software to manage and submit CIS (Construction Industry Scheme) returns. HMRC has approved a range of software providers that allow contractors to verify subcontractors, calculate deductions, and submit CIS returns directly online. Using accounting software simplifies the process, reduces the risk of mistakes, and ensures that your business stays compliant with HMRC’s requirements.

What is the Construction Industry Scheme

The Construction Industry Scheme is a set of HMRC rules that apply to contractors and subcontractors working in the construction sector. Under CIS, contractors must:

  • Verify each subcontractor with HMRC before payment.

  • Deduct tax (usually 20% for registered subcontractors or 30% for unregistered ones).

  • Submit a CIS return every month showing payments and deductions.

  • Provide payment and deduction statements to subcontractors.

The system helps HMRC collect tax from subcontractors throughout the year and ensures everyone working in the industry pays the correct amount.

Using accounting software for CIS submissions

Accounting software that is CIS enabled can connect directly to HMRC, allowing you to complete all your CIS obligations without using the online Government Gateway portal. Most modern software packages include built in CIS tools that can:

  1. Verify subcontractors automatically – The software checks each subcontractor’s status with HMRC and applies the correct deduction rate (gross, standard, or higher).

  2. Calculate CIS deductions – It automatically works out how much tax to deduct from subcontractor payments.

  3. Submit monthly CIS returns – Once all payments are recorded, the system compiles your CIS return and sends it directly to HMRC.

  4. Generate payment and deduction statements – It produces monthly statements for each subcontractor as proof of tax deducted.

Popular CIS compatible accounting software includes Xero, QuickBooks, Sage, and FreeAgent. These platforms are fully HMRC recognised and link seamlessly with other accounting features such as payroll and VAT.

Benefits of using software for CIS management

Using accounting software to manage CIS offers several key advantages:

1. Accuracy and compliance

Manual CIS calculations can lead to mistakes, especially when dealing with multiple subcontractors. Accounting software eliminates calculation errors by applying HMRC rules automatically. It also ensures you meet filing deadlines and avoid penalties.

2. Time savings

Instead of logging in to HMRC’s online service every month, you can submit returns directly through your software in just a few clicks. This saves hours of administrative work, particularly for contractors managing large teams.

3. Real time reporting

Many platforms let you track CIS liabilities in real time. You can see how much tax has been deducted each month and how much you owe to HMRC before the payment deadline.

4. Integrated bookkeeping

Because CIS functions are built into accounting systems, all payments and deductions automatically appear in your financial records. This keeps your books accurate and ready for VAT and year end reporting.

5. Secure record keeping

CIS software stores all submissions, verification records, and deduction statements securely in one place. This makes it easy to access historic data if HMRC ever requests an audit or if subcontractors ask for copies of their statements.

How to set up CIS in your accounting software

Most accounting platforms make it straightforward to enable CIS. The general steps include:

  1. Register for CIS with HMRC – Before you can use the software, your business must be registered as a contractor with HMRC. You will receive a CIS reference number.

  2. Activate CIS in your software settings – Go to your accounting system’s settings and turn on the CIS feature. You may need to enter your Government Gateway credentials to connect it with HMRC.

  3. Add subcontractor details – Enter each subcontractor’s information, including their UTR (Unique Taxpayer Reference), NI number, and verification status.

  4. Verify subcontractors – Use the software’s verification tool to confirm each subcontractor’s tax status with HMRC.

  5. Record payments – When you pay subcontractors, record gross amounts, materials, and any deductions.

  6. Submit your monthly return – Once all payments are entered, the software prepares your CIS return and submits it to HMRC. You must do this by the 19th of each month.

The system will also generate and send payment and deduction statements automatically once the return is complete.

CIS payment and submission deadlines

Contractors must submit CIS returns and pay deductions to HMRC every month. The deadlines are:

  • CIS return submission: by the 19th of the month following the payment.

  • Payment to HMRC: by the 22nd of the month if paying electronically, or the 19th if paying by cheque.

Missing these deadlines can result in penalties starting at £100 for one day late, increasing the longer the return is outstanding. Using accounting software with built in reminders helps ensure you never miss these key dates.

Example in practice

A small building firm employs ten subcontractors. Previously, the firm used spreadsheets and the HMRC portal to manage CIS. After switching to QuickBooks, the system automatically verified subcontractors, calculated monthly deductions, generated payment statements, and submitted CIS returns electronically.

The firm saved several hours per month in administration, avoided late submission penalties, and gained a clear view of its CIS liabilities in real time.

How accountants help with CIS and software setup

Accountants experienced in the construction sector can:

  • Help you choose and set up HMRC approved CIS software.

  • Verify subcontractors and review deduction calculations.

  • Manage monthly CIS submissions on your behalf.

  • Reconcile CIS payments with HMRC.

  • Train your team to handle CIS functions independently.

They can also check that your CIS deductions align with your tax obligations and that all documentation meets HMRC’s record keeping standards.

Conclusion

Yes, you can use accounting software for CIS submissions, and doing so can make compliance far easier. CIS enabled software automates verification, deductions, and monthly submissions while keeping your financial records up to date.

By integrating CIS management with your accounting system, you save time, reduce the risk of errors, and ensure that all returns are submitted on time. With guidance from an accountant, you can set up the system correctly and focus more on running your construction business efficiently.