Product spotlight: CIS simplified

Craig Clarke
Director of Product

If you work with construction clients, you know the Construction Industry Scheme (CIS) adds a surprising layer of complexity to standard bookkeeping. CIS, as with Making Tax Digital (MTD), isn’t just about making the submission deadlines. It’s about making it work in the real world, across multiple clients, with inconsistent records, limited client engagement and tight deadlines.

What we’ve heard consistently from our practice partners is that the friction isn’t in the scheme itself, but in the bookkeeping that sits underneath it. Data entry, reconciliation and deductions all become harder when records are inconsistent.

It was clear where we needed to focus. We’ve turned those manual headaches into a streamlined routine that supports the workflows you know today. Instead of treating CIS as a separate compliance workflow, we focused on how it fits into the accounting processes practices are already running.

Supporting subcontractors

One of the clearest messages we heard from practices was that subcontractor workflows needed to be simple, flexible and easy to repeat at scale.

For subcontractors, the bookkeeping challenge is familiar. Payments arrive after CIS deductions have already been taken, so the record needs to reflect both the full value of the work and the deduction itself. If that isn’t handled cleanly, reconciliation becomes messy very quickly.

FreeAgent has supported CIS subcontractors for some time, but we wanted that workflow to fit more naturally into the way people actually work.

For some subcontractors, invoicing first makes sense. For others, it doesn’t. Many are simply working from the bank feed and need to explain income as it comes in. That’s why we built the ability to explain subcontractor payments directly from the bank. It means CIS income can be recorded from the transaction itself, with deductions and materials handled as part of that flow.

That matters on its own, but it matters even more in the context of MTD. As more sole traders move towards quarterly reporting, practices need reliable digital records throughout the year, not just at year end. For subcontractor clients, being able to explain CIS income directly from the bank feed helps create exactly that. It reduces manual effort, improves data quality and makes it easier to support large numbers of clients consistently.

A big part of our thinking was that we weren’t just trying to make CIS bookkeeping easier in isolation. We were trying to make it easier in a way that also supports the wider shift towards digital record keeping and reporting.

Building for contractors

Accountants also told us they need better workflows for contractors as well as subcontractors. So we extended our CIS support to contractors.

Contractors can now:

• manage all subcontractor records in one place
• track deductions as payments are made
• prepare the information required for monthly CIS 300 returns
• generate and send payment and deduction statements for subcontractors

Contractor and subcontractor workflows can now sit inside the same system, rather than being split across different tools or manual processes.

FreeAgent also automatically offsets CIS deductions suffered against payroll liabilities and CIS owed when payroll is run, reducing manual adjustments and keeping liabilities clear.

For practices supporting construction businesses, that means contractor and subcontractor workflows can now sit inside the same system, rather than being split across different tools or manual processes.

Why bookkeeping still matters most

CIS introduces deduction rates, payment statements and reporting requirements. But when practices described the friction they experienced, it usually came back to something simpler: inconsistent data.

If transactions are recorded incorrectly or deductions are applied inconsistently, everything that follows becomes harder. Reconciliation takes longer, reporting becomes more complicated and errors become more likely.

When deductions and payments are captured correctly at the point transactions are recorded, everything downstream becomes easier.

Scaling up with MTD and CIS in sync

Managing MTD for subcontractors is most effective when the end-to-end journey is simplified. We’ve identified that the real value lies in a unified workflow where CIS and MTD requirements are handled simultaneously. When the process is streamlined, it becomes significantly easier for practices to manage these clients at scale with minimal manual intervention.

This optimised journey centres on automation and bulk actions. By connecting bank feeds and utilising bulk bank feed reconsent, transactions flow in effortlessly. From there, explaining CIS income directly from the bank feed ensures deductions are captured immediately. This allows for bulk or automated quarterly filings, turning the final declaration into a simple review step rather than a deep-dive audit, as the bookkeeping remains current throughout the year. 

The most valuable insights don’t come from simply reading the legislation, but from observing how accountants and bookkeepers execute the work daily.

We recognise that the most valuable insights don’t come from simply reading the legislation, but from observing how accountants and bookkeepers execute the work daily. 

To prepare for these changes, practices should evaluate where manual work is currently creeping into their subcontractor and contractor workflows. Ensuring that information is tracked consistently and that bookkeeping processes support year-round accuracy - rather than just ‘point-in-time’ reporting - is essential for a smooth transition.

FreeAgent is designed to remove the friction from CIS management. Whether you are supporting subcontractors, contractors, or both, our platform provides the confidence and efficiency needed to handle complex tax requirements with ease.

You can find out more about why practices choose FreeAgent for CIS clients or request a free trial to see how FreeAgent can help you and your clients.