CIS: subcontractors

How to handle invoice receipts, and payments of CIS tax, if you're a subcontractor.

Invoicing your customers

You'll invoice your customers as normal, for the full value of the work done. Don't deduct the tax from this invoice, or your income will be too low.

Receiving payment

That means that your customer, the contractor, will pay you less than you invoiced them for. That'll either be 30% less if you're not registered as a subcontractor with HMRC, or 20% less if you are.

Use this method to make sure that your invoices are shown as fully paid.

How should I explain the payment that FreeAgent creates?

That depends on your company type.

Sole trader, or partner in a partnership

Explain the payment as Money Paid to User > Drawings, because it's part of your self assessment income tax, which isn't a business cost when you're a sole trader or partner.

Limited company

Explain the payment as Taxes > PAYE/NI. This is because HMRC set off your CIS deductions against PAYE when your business is a limited company.

I need help with...

View all categories →

Did you find this article useful?

We're glad to hear that!

...and thanks for taking the time to feed back, it's appreciated.

We’re sorry to hear that. Would you like to...

Contact our support team

Send us some feedback...