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EzzyBills User Guide

How to enable CIS for UK Xero?

I. Introduction

I.1 Enable CIS in your Xero

If you have a UK Xero account, you may enable the CIS scheme as a “contractor” (or a subcontractor). In this page, we assume that your business is a “contractor”. Basically,

To enable it in Xero, follow this Xero instruction (“Accounting” menu > “Advanced” > “Financial settings” – screenshot example). You can enable it for a Xero demo account, which is handy for testing.

I.2 Why the government require CIS?

To make it easier to collect tax on a monthly basis. So that the income for subtractors will be taxed along the way, not the end of year. The government requires the contractor to collect the tax from payments to subcontractors and then hand it over the government.

In this way, payment to subcontractors are now similar to payment to employee (i.e. tax are collected before payment).

I.3 How does Xero handle CIS?

I.3-1 CIS account codes

After enable CIS, Xero will create three account codes. You can see that with these account codes to be used on labour and material, xero will be able to calculate the tax.

I.3-2 Xero Contact for subcontractor

In Xero, you will also need to fill out the subcontractor data, in Xero Contact.

An example Xero Contact below:

I.3-3 Xero bills from a subcontractor

For a bill paid to a subcontractor, the account codes for CIS will need to be used.

An example is shown below. Please note that the CIS is only applicable to the account code 321 CIS Labour Expense (not the material cost).

II. How EzzyBills create contractor bills in Xero

We will use Xero invoice history and subtractor’s Xero Contact data to determine the account codes.

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