Non deductibles (i.e. materials)

CIS Construction Industry Scheme - An alternative to PAYE payroll for the construction indusry. Using the Construction Industry Scheme, contractors deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance. Deductions made only apply to labour – not materials.

Create a pay code

If a subcontractor bills you for materials, then you need to create a new Pay Code. You only need to do this once.

1. Open the required employer.

2. Go to your company name > Settings.

3. Select Pay Codes.

   

4. Select Add a Pay Code.

   

5. Enter a Code and Title

   The code and title both appear on the payslips. Giving them descriptive names, such as "Materials", is recommended to avoid confusion.

6. Set the Type to Addition, and Calculation to Fixed Amount.

7. De-select Tax, NI, and Pension.

8. Select Create Code.

   

Add the addition

To add the addition for materials to the payslip A statement provided by an employer to an employee, detailing their wages, deductions, and net pay for a specific pay period.This is a legal requirement under the employment rights act and should be received on or before the pay date.:

1. Go to Payroll and select the Payslips tab.

2. Select the relevant subcontractor from the list, then select Edit Additions/Deductions.

   

3. Select + New Deduction / Addition and from the Code list, choose the one you created for materials.

4. Enter the amount and then Create then Update.

Good to know...

• Once a pay code has been used in a pay run, it can no longer be deleted

• When you update the Payslip you’ll see that the materials have been added but the deduction is only being applied to the labour, as required.

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