CIS deductions for subcontractors in Zoho Books: the short answer
To handle CIS deductions for subcontractors in Zoho Books, you take four steps. Enable the Construction Industry Scheme under Settings, Taxes, and set your organisation's CIS role. Turn on CIS tracking for each subcontractor with the correct deduction rate. Then record their work on bills. Zoho Books calculates each deduction and lets you file the monthly return with HMRC.
Each month you file your CIS return so it reaches HMRC by the 19th. You file even if you paid no subcontractors, by sending a nil return or telling HMRC you are inactive. You also pay the deductions to HMRC by the 22nd (the 19th if you pay by post). Finally, you give each subcontractor you made deductions from a payment and deduction statement within 14 days of the end of the tax month.
The Construction Industry Scheme (CIS) is a scheme under which contractors deduct money from a subcontractor's payments and pass it to HM Revenue and Customs (HMRC). GOV.UK explains that the deductions count as advance payments towards the subcontractor's tax and National Insurance. A contractor is someone who pays subcontractors for construction work. A subcontractor is someone who does construction work for a contractor.
This guide follows the setup in the order you meet it. It then shows where errors come from before a monthly return. Most of those errors start in the subcontractor's record, not in the return itself. The product steps come from Zoho's own help pages for CIS and CIS filing. Every scheme rule comes from GOV.UK.
Who CIS applies to: contractors, subcontractors and businesses that are both
Contractors must register for CIS, according to GOV.UK's guide to the Construction Industry Scheme. Subcontractors do not have to register. However, deductions are taken from their payments at a higher rate if they are not registered. Anyone who does construction work for a contractor should register as a subcontractor. A business that falls under both categories must register as both.
CIS covers most construction work to a permanent or temporary building or structure. It also covers civil engineering work such as roads and bridges. GOV.UK lists the kinds of work that count as construction:
- preparing the site, for example laying foundations and providing access works
- demolition and dismantling
- building work
- alterations, repairs and decorating
- installing heating, lighting, power, water and ventilation systems
- cleaning the inside of buildings after construction
You do not have to register if you only do certain jobs. These include architecture and surveying, scaffolding hire with no labour, carpet fitting, making construction materials and delivering materials. Work on a construction site that is clearly not construction is also excepted, such as running a canteen or site facilities.
Your registration status decides how you configure CIS in Zoho Books. A business registered only as a contractor needs different settings from one registered as both. Confirm your status before you change any setting.
Zoho Books plans that include CIS filing, and the CIS role you set
CIS filing in Zoho Books is available on the Professional, Premium, Elite and Ultimate plans. Check your organisation's plan before you plan a month end around it. If you are on a plan outside that list, CIS filing will not be available to you.
Zoho Books lets your organisation set its CIS role as Contractor, Subcontractor or Both. The role decides which documents carry deductions:
- Contractor: you record deductions on the bills you receive from subcontractors.
- Subcontractor: deductions appear on the invoices you raise to contractors, calculated with the CIS deduction rate in your CIS settings.
- Both: you use both bills and invoices under CIS, because you act as contractor and subcontractor.
Choose the CIS role carefully, because Zoho Books does not let you undo CIS easily. You cannot disable CIS in your organisation after you create a transaction under CIS. You can disable it only after you delete all transactions under CIS. In practice, that means settling the role before anyone enters the first CIS bill or invoice.
A firm that does building work for a main contractor and also hires its own trades should pick Both. A firm that only pays subcontractors should pick Contractor. If your registration with HMRC is as both, your CIS role in Zoho Books should match it.
Enabling CIS and CIS filing in Zoho Books settings
Enabling CIS in Zoho Books takes two separate settings, and many organisations switch on only the first. The first turns on the scheme itself. The second lets Zoho Books generate returns and submit them to HMRC.
Turn on the Construction Industry Scheme
Go to Settings and click Taxes under Taxes & Compliance. In the Taxes pane, click Construction Industry Scheme. Enable CIS and choose your role as Contractor, Subcontractor or Both, as described in Zoho's CIS help page.
Turn on CIS returns generation and submission
Navigate to the Construction Industry Scheme tab in the same Taxes settings. Check the option Enable CIS returns generation and submission to HMRC. Zoho Books integrates with HMRC's system for CIS submissions, so this option lets you generate and file returns without leaving the software.
Give the right people access to file
The admin of the organisation gets the option to file returns automatically once CIS filing is enabled. Other users need you to enable access to file returns. If your bookkeeper or accountant is not the admin, grant that access well before the first return is due. Otherwise the person preparing the return will find they cannot submit it.
Setting up each subcontractor as a CIS vendor in Zoho Books
CIS tracking must be enabled for each subcontractor before you can create CIS transactions for them. In Zoho Books, a subcontractor is a vendor. A vendor without CIS tracking will not carry a CIS deduction on its bills, however you code the lines.
Each subcontractor's record holds their CIS tracking details. Zoho's help pages name two of them. The UTR is the subcontractor's Unique Taxpayer Reference. The NINO is their National Insurance number. Zoho warns that if these details are incorrect, you may meet errors when submitting your returns to HMRC.
The deduction rate also lives on the vendor record. On bills, Zoho Books calculates the deduction using the CIS deduction rate you provided when adding the subcontractor as a vendor. One wrong rate therefore repeats on every bill for that subcontractor until someone notices.
The rate you enter should match the subcontractor's status with HMRC. GOV.UK says registered contractors can sign in to CIS online to verify a subcontractor. It also says unregistered subcontractors have deductions taken at a higher rate. Verify first, then enter the rate.
At Svennis we check every subcontractor's UTR or NINO and deduction rate against their HMRC verification before the first bill is entered. A wrong digit in a vendor record does not show up on the bill. It only surfaces as an error when the return is submitted.
Recording CIS deductions on subcontractor bills, with a worked example
A CIS deduction in Zoho Books is recorded on a bill, not on an expense. CIS is not supported in Retainer Invoices, Expenses or Recurring Expenses. If a subcontractor's charge goes in as an expense, no deduction is calculated and it will not reach the return.
Take a contractor whose organisation is set up with the CIS role of Contractor. It engages a plastering firm, which we will call Northgate Plastering, for alterations and repairs on a client's building. The work falls within GOV.UK's list of construction work. Here is how the bill flows through Zoho Books:
- Add Northgate Plastering as a vendor and enable CIS tracking on the record.
- Enter the firm's UTR or NINO exactly as the firm gave it to you.
- Verify the firm through CIS online and enter the matching CIS deduction rate on the vendor record.
- When the firm's invoice arrives, create a bill for Northgate Plastering and choose the services that fall under CIS.
- Zoho Books calculates the deduction automatically, using the rate on the vendor record for the services you chose.
- Open the CIS report and confirm the bill appears with its amount liable to deduction and its deducted amount.
The last step matters most. The CIS report shows every transaction raised under CIS, the total amount liable to deduction and the deducted amount. If a bill you expected is missing, the usual causes are a vendor without CIS tracking or work entered as an expense.
Setup choices that cause CIS errors before a monthly return
Most CIS problems in Zoho Books come from a handful of setup choices made weeks before the return. The table lists each choice, what goes wrong when it is wrong, and where to check it.
| Setup choice | What goes wrong | Where to check |
|---|---|---|
| CIS role | Deductions appear on the wrong documents, and CIS cannot be disabled once CIS transactions exist | Settings, Taxes, Construction Industry Scheme, against your HMRC registration |
| CIS filing option | Returns cannot be generated or submitted from Zoho Books | The Construction Industry Scheme tab: Enable CIS returns generation and submission to HMRC |
| Access to file returns | A user who is not the admin cannot submit the return | User access for each person who files |
| Vendor CIS tracking | No deduction is calculated on that subcontractor's bills | Each subcontractor's vendor record |
| UTR or NINO | Errors when submitting the return to HMRC | Vendor record, against the subcontractor's own details |
| Deduction rate on the vendor | Every bill for that subcontractor carries the wrong deduction | Vendor record, against the CIS online verification |
| Expenses or recurring expenses | CIS is not supported, so the payment is left out | Record subcontractor work as bills |
Run through the table once when you first enable CIS. Run through the vendor rows again whenever you take on a new subcontractor. Checking a record takes minutes, while chasing a rejected return near the deadline takes much longer.
Preparing and filing the monthly CIS return from Zoho Books
Contractors must report the payments they make to subcontractors to HMRC through monthly returns. Zoho Books lets you file these returns directly with HMRC and record the payments in your organisation, as set out in Zoho's CIS filing help page.
Start with the CIS report. Compare the transactions it lists with the subcontractor bills you entered for the month. Check that the amount liable to deduction and the deducted amount look right for each subcontractor.
To submit, enter your Government Gateway User ID and Password. You then acknowledge the declarations:
- Information Correct Declaration (mandatory): you declare that the information provided is accurate.
- Employment Status Declaration: Zoho Books marks this box as optional, but HMRC requires contractors to declare on each return that the subcontractors listed are not employees, so assess every worker's status before you tick it.
- Subcontractor Verification Declaration: Zoho Books marks this box as optional, but HMRC expects the return to declare that every subcontractor who needs verifying has been verified, or was included in a CIS return in the current or previous two tax years.
Take the employment status declaration seriously. GOV.UK warns that you could get a penalty of up to £3,000 if you give the wrong employment status for a subcontractor on your monthly return. Zoho's page adds that a false declaration may result in HMRC investigation for disguised employment.
Once HMRC accepts the return, its status in Zoho Books changes to Submitted to HMRC. If you filed directly with HMRC through CIS online instead, use Mark as Filed so your records match. VAT returns are a separate process under Making Tax Digital, covered in this site's guide to VAT returns from Zoho Books.
What CIS means for a UK company using Zoho Books
CIS can apply to a UK company even if it does no construction work itself. A business that does not do construction work must register as a contractor once its construction spend goes over £3 million in any rolling 12-month period, so it needs to check that total regularly. A company that commissions a lot of building or fit-out work should watch that figure.
Zoho Books can help you see that spend in one place. If you already track construction costs against a plan, our guide to budgets versus actuals in Zoho Books shows how to set up the comparison so the totals mean something. That gives you an early view of how close you are to the threshold.
The same CIS rules apply to businesses based outside the UK that do construction work in the UK as a contractor or subcontractor. A foreign parent company with a UK project cannot assume the scheme does not apply to it.
For a UK company, Zoho Books covers the tracking, the deduction and the filing in one system. HMRC's own CIS online service remains available for filing returns and verifying subcontractors. You can use either route for filing. Just keep Zoho Books up to date with Mark as Filed when you file outside it. For more on how Zoho Books handles UK accounting and HMRC, see our product page.
Next steps for setting up CIS deductions in Zoho Books
CIS setup in Zoho Books works best done in a fixed order. Here are the steps to take this week:
- Confirm your CIS registration status on GOV.UK: contractor, subcontractor or both.
- Check that your Zoho Books plan is Professional, Premium, Elite or Ultimate.
- Enable CIS under Settings, Taxes, Construction Industry Scheme, and set the matching role.
- Check Enable CIS returns generation and submission to HMRC, and grant filing access to anyone who is not the admin.
- Open every subcontractor's vendor record and check CIS tracking, UTR or NINO, and the deduction rate.
- Enter one subcontractor bill and confirm it appears correctly in the CIS report.
- Prepare the first monthly return and review the declarations before you submit.
- Each month, file your CIS return so it reaches HMRC by the 19th, even if you paid no subcontractors (file a nil return or tell HMRC you are inactive).
- Each month, pay the deductions to HMRC by the 22nd (the 19th by post). Give each subcontractor you made deductions from a payment and deduction statement within 14 days of the end of the tax month.
Remember that CIS cannot be disabled once CIS transactions exist. If you are unsure about the role or the vendor setup, get help before the first bill rather than after it. Our post on Zoho Books partner services beyond the initial setup explains what support looks like once you are live. If you are new to working with a partner, start with what a Zoho partner is and does.