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CIS & RCT Retention Tax

1: Setup and configuration

2: Verify Subcontractor

3: Invoice and Pay

4: Monthly Return

5: Release Notes

CIS & RCT app provides capabilities to handle forms of retention tax on work performed by subcontractors where you can calculate, retain, post, and report the retained amounts according to the needs per supplier.

• CIS - Construction Industry Scheme for UK - For a comprehensive understanding of subcontractor verification within the CIS scheme, refer to the official HMRC documentation: CIS340 - Subcontractor Verification.

• RCT - Relevant Contract Tax for Ireland

The purpose of the schemes is designed to withhold tax that applies to certain payments by principal contractors to subcontractors, thus on vendor level in Business Central. The rates vary across states and legislations and can be adjusted on a detailed level using the retention tax app.

YouTube channel

Watch our YouTube channel for more information about pryme CIS & RCT.

1 - Setup and configuration

CIS/RCT Setup

The CIS/RCT Setup is similar to the VAT posting setup:

• Type and period for the tax retention

• Posting setup for all combination of what you buy and from whom. The combinations are contained of various CIS/RCT Business and Product Posting Groups.

In addition to the CIS/RCT Setup, users are encouraged to configure online services, such as Monthly Return and Subcontractor Verification, by supplying essential credentials provided by HMRC data on the contractor registration.

Assisted setup

The CIS/RCT Assisted Setup Wizard in Business Central is designed to streamline the configuration of subcontractor withholding tax (CIS/RCT). This tool helps ensure that key tax-related settings are correctly configured, enabling companies to comply with regulations and automate the withholding tax process. The wizard guides users through the necessary steps to set up tax rates, posting groups, and general ledger (G/L) accounts. In addition, it offers the option to configure online submission to HMRC, providing a complete solution for managing CIS/RCT tax requirements.

Tip

You can use the CIS/RCT Setup guide only if you have created a My Company and haven’t posted transactions for CIS/RCT or set up vendors, items, resources, or accounts with CIS/RCT posting groups.

To set up CIS/RCT using the assisted setup guide (recommended)

Choose the 🔍 icon and enter Assisted Setup.
Choose Set up CIS/RCT and complete the steps.

To set HMRC data

Choose the 🔍 icon, enter CIS/RCT Setup, and then choose the related link.
Under the HMRC Data fasttab is the data that you should provide as a contractor.

Required fields:

Field	Description
Accounts Office Reference No.	This is 13 characters, like 123PX00123456 or 123PX0012345X. It will be on letters from HMRC about PAYE and when you registered as an employer.
Contractor UTR	This is 10 characters, like 1234567890. It might just be called ‘tax reference’. You can find your UTR number: in your Personal Tax Account, in the HMRC app, on previous tax returns and other documents from HMRC (for example, notices to file a return or payment reminders).
Tax Office Number	This is 3 characters, like 123. It is the first three digits of the Employer PAYE reference. If your Employer PAYE reference is 123/AB456 the the Tax Office number is 123.
Tax Office Reference	This is 5 characters, like AB456. It is the last five digits of the Employer PAYE reference. If your Employer PAYE reference is 123/AB456 the the Tax Office reference is AB456.
Sender ID	The user ID for the account used to log in to the HMRC online services.
Password Value	The password for the account used to log in to the HMRC online services.

Tip

Under Related action group, you can find Field Formats, which help in validation of some required data for CIS submission. The character ‘#’ means that only numbers are allowed, ‘@’ that it must be alpha, while the sign ‘?’ means it can be alphanumerical. Validation for existing formats in the table, will be done automatically.

CIS/RCT Tax Posting Groups

Configuring Posting Groups for vendors and products is crucial for accurate financial management, ensuring that deductions and settlements are appropriately recorded in the General Ledger.

Choose the 🔎 icon, enter CIS/RCT Setup, and then choose the related link.
Choose CIS/RCT Posting Groups, and then Posting Setup.
Fill in the fields as necessary. Hover over a field to read a short description.

Tip

Don´t forget to setup all the combinations of the CIS/RCT Posting Groups.

Type	Description
Posting Setup	Set up the combinations of the CIS/RCT Business and Product Posting Groups, and choose the CIS/RCT and the G/L account for retention tax posting and settlement upon confirmation of tax authorities.
Business Posting Groups	Set up the codes to select on the vendor card for the use of retention tax, and for identifying each retention entry in the CIS/RCT Entries.
Product Posting Groups	Set up codes for CIS/RCT to be selected on item card, G/L account, resource and directly on the purchase lines, for identifying each retention entry.
Categories	Set up codes for different tax categories of labour or materials. The categories can be set on each product posting group and will be saved on the entries for reporting purposes.

To set Business Posting Group on Vendors

Choose the 🔎 icon, search for Vendors
On the vendor list choose the vendor you want to set the business posting group for.
Under CIS/RCT fasttab, set Use CIS/RCT to True.
Choose the CIS/RCT Business Posting Group.

To set CIS/RCT product posting group for items, resources or G/L accounts

On all items, resources and G/L accounts that are used for purchase on vendors with tax retention, you can add a CIS/RCT Product Posting Group, that will be populated on the invoice line. If you are using the same g/l account for different kind of services, you can leave the CIS/RCT Product Posting Group blank and select it on the invoice line.

Choose the 🔎 icon, enter Item or Resource or Chart of Accounts. Choose the related link.
Under posting/invoice details, choose the CIS/RCT Product Posting Group.

CIS/RCT Periods

CIS/RCT Periods function similarly to VAT periods, providing a structured framework for managing and calculating retention taxes. Establishing these periods is crucial for further posting withing CIS/RCT Schema.

CIS/RCT Periods are created based on Starting Date, Period No. Series and Period Calculation Type in the CIS/RCT Setup.

Choose the 🔎 icon, enter CIS/RCT Setup, choose the related link.
Choose CIS/RCT Reporting, and then Return Periods.
Click on Get Retention Tax Periods .

2 - Verify Subcontractor

To verify subcontractor online

The Subcontractor Verification feature allows users to request and retrieve essential data about subcontractors directly from the HMRC portal. This functionality ensures that the information used for Construction Industry Scheme (CIS) reporting is up-to-date, accurate, and aligns with HMRC guidelines.

To be ably to do the online verification with HMRC, you need to have the following setup in the Retention tax setup

Tax Scheme = CIS
Retention Tax Submit = HMRC

Choose the 🔎 icon, search for Vendors
On the vendor list choose the vendor you want to verify.
Under CIS action group, choose the Verify Subcontractor.

The application communicates with the HMRC portal using secure authentication protocols to request relevant subcontractor data. This data includes key details such as verification status, tax treatment, and compliance information.

Upon receiving the HMRC response, the application provides a verification outcome. Users can view the Tax Treatment Status, Verification Reference No. and Verification Date of the subcontractor, ensuring that the information aligns with the latest records on the HMRC portal.

To verify subcontractor manually

Choose the 🔎 icon, search for Vendors.
On the vendor list choose the vendor you want to verify.
On the Retention tax tab, change the Verification Method to Manual, and fill in the Last CIS Verification Date.

Tip

A contractor does not have to verify a subcontractor if they last included that subcontractor on a return in the current or two previous tax years. If you are paying a subcontractor in the tax year that runs from 6 April 2023 to 5 April 2024, you do not have to verify them if you have already included them on any monthly return since 6 April 2021.

3 - Invoice and Pay

Before you start to create a purchase documents for a subcontractor that is registered for retention tax you need to do some setup on the vendors, items, resources and G/L accounts. You find more information here.

Purchase document

Choose the 🔎 icon, enter Purchase Order/Purchase Invoice, and then choose the related link.
Fill in the fields as necessary. Hover over a field to read a short description. If the vendor is registered for retention tax all lines, except the type of Comment, Fixed Asset and Charge (Item), automatically gets the CIS/RCT Business Posting Group populated on the line.
If the CIS/RCT Product Posting Group is not set on the resource, item or g/l account, you need to add this information on the line.

When posting the purchase invoice the system creates a CIS/RCT Entry and Detailed CIS/RCT Entry when you post the purchase invoice. The deducted tax amount is recorded in the Expected Amount field.

Pay a purchase invoice

When you create a payment an additional Detailed CIS/RCT Entry will be created. This entry will have the Type Application. On the CIS/RCT Entry, the Expected Amount will be reduced and the Actual Amount will be increased with a ratio of the payment.

When the document applied, the CIS/RCT Entry and the last Detailed CIS/RCT Entry will have Expected Amount zero and Actual Amount with entire deduction.

4 - Monthly Return

This section outlines the essential requirements for monthly payment reporting within the Construction Industry Scheme (CIS), as specified by Her Majesty’s Revenue and Customs (HMRC). According to HMRC guidelines, all scheme participants are obligated to submit a comprehensive monthly return that details payments made within the scheme or, alternatively, report if no payments have occurred during the specified period.

Close retention tax period
Submit retention tax period
Reporting inactivity

Close CIS/RCT periods

To make a submission to the authorities, you must close CIS/RCT Tax Period. You cannot reopen a period, clear the checkboxes, nor post into close period.

Choose the 🔍 icon, enter CIS/RCT Periods, and then choose the related link.
Choose the Close Retention Tax Periods action. The connected Detailed CIS/RCT Entries will be closed

Note

Please be aware that the system allows the closure of only consecutive periods. Ensure that you adhere to this requirement when managing and finalizing reporting periods.

CIS/RCT Tax Statements

When a period is closed, the CIS/RCT Statements are created for that period. While a CIS/RCT Period contains information about the payments deduction for some period of time, a CIS/RCT Statement shows information for a period of time and particular vendor.

Choose the 🔍 icon, enter CIS/RCT Period, and then choose the related link.
Choose the Drill-down button in the Statements field. If there were any payment for the closed period, you will be able to see detailed information on deductions, providing a comprehensive overview of the CIS/RCT Statement for the specified period and vendor.

Submit CIS/RCT Period

If you set Submit Method to HMRC in the retention tax setup page, it is possible to submit the data directly to the HM Revenue & Custom’s online service. For the successful monthly submission, it’s essential to configure and input precise HMRC data obtained during the schema registration to ensure accurate setup to pass the quality standard and business validation. Please read about it here.

To create submission request

Choose the 🔍 icon, enter CIS/RCT Period, and then choose the related link.
Choose the Submit Retention Tax Period action. On the action run, you will be asked to agree with declarations that are needed for successful submission.

Note

To create monthly return, the period has to be closed previously. More about it you can find here.

Upon successful submission, the retained amount from the GL account designated for retention tax is automatically reallocated to the settlements account, as configured in the posting setup.

Report Inactivity

In instances where no deductions have been made during a specific reporting period, it is still essential to submit a report indicating this inactivity. This ensures accurate and compliant reporting under the Construction Industry Scheme (CIS). To report inactivity, follow these steps:

Choose the 🔍 icon, enter CIS/RCT Period, and then choose the related link.
Choose the Submit Retention Tax Period action. On the action run, you will be asked to agree with declarations, and then check the option Report Inactivity to True in the request page.

5 - Release Notes

3.4 (October 2024)

Application enhancements

Restructuring fields for CIS/RCT

The fields are restructured to enhance user-friendliness, making it easier for users to locate the information they need. This update is designed to simplify navigation and make the app more efficient, so you can find what you need without any hassle.

Fixes and minor adjustments

#196 Link pages and reports to the documentation
#205 Ensure app is registered before assisted setup is run
#211 CIS Return Statement shows wrong amounts
#214 Error on comment lines

3.3 (September 2024)

Application enhancements

CIS/RCT assisted setup

The CIS/RCT Assisted Setup Wizard provides a seamless onboarding experience for setting up subcontractor withholding tax. It guides users through key configurations, including tax rates, posting groups, and accounts, ensuring accurate setup. If previous transactions exist, the wizard ensures manual adjustments are made to avoid setup issues. This setup automates tax configurations, saving time and minimizing the effort needed for compliance with HMRC requirements. A product video has also been added to the Business Central product videos section, offering a detailed demo to help new users better understand the setup process. Learn more.

3.2 (August 2024)

Fixes and minor adjustments

#187 Change of Purchase Tax Product Posting Group in the Purchase Lines doesnt update the Retention Tax Amounts

3.1 (July 2024)

Application enhancements

Renaming Purchase Tax Retention objects

Pages and fields within the Purchase Tax Retention module are now renamed according to the chosen Tax Scheme. Users can still search for these pages and fields using their old names, ensuring a smooth transition and uninterrupted workflow.

Site Identifier Number included in the Purchase Lines

Sometimes there are subcontractors that do work related to different sites, hence providing an invoice that has multiple lines – for each different site a different line. Site Identifier Number in the Purchase Lines resolves that. When the Site Identifier is populated on the Purchase Header, the Site Identifier on the Purchase Lines will be populated automatically with it. The field on the Purchase Lines is editable.

Fixes and minor adjustments

#168 Deductions shown in Vendor Statistics
#169 You can post an Purchase Invoice with blank Retention tax Product Posting Group and Retention Tax category

3.0.2 (May 2024)

Fixes and minor adjustments

CIS verification fails if there are more than 100 vendors

3.0.1 (May 2024)

Fixes and minor adjustments

Fix date format for subcontractor verification

3.0 (May 2024)

Application enhancements

Default Retention Tax Business Posting Group from Tax Treatment Status

When a Tax Treatment Status is set on a vendor, most often by verification, the appropriate Retention Tax Business Posting Group is automatically set.

2.9.2 (April 2024)

Fixes and minor adjustments

#162 Verification fails if there are more than 100 vendors in the database

2.9.1 (April 2024)

Fixes and minor adjustments

#160 Upgrade to 2.9 fails

2.9 (April 2024)

Application enhancements

Multiple Site Identifier Nos RCT (CIS)

Compliance with RCT standards, the pryme CIS & RCT tax retention now supports multiple Site Identifier Nos (SINs) per vendor. With a new editable ‘Site Identifier No.’ field on Purchase Documents, users can accurately record and track SINs, enhancing reporting capabilities.

Blank posting groups in Retention Tax Posting Setup

To accommodate scenarios where the same G/L account is utilized for various subcontractor services, users can now leave the product posting group blank in the Retention Tax Posting Setup.

Fixes and minor adjustments

#150 Correct required formats for HMRC fields
#151 Set Subcontractor’s AOref field invisible for CIS

2.8.1 (February 2024)

Fixes and minor adjustments

#152 Subcontrator verification fails

2.8 (February 2024)

Application enhancements

Returned Receipt

Digital certificate returned within the success response with the certificate authority is now available in the field for each Retention Tax Period. Users now have option to view/print/save returned receipt with previously saved XML submission. Receipt is important as it is the Taxpayers proof of submission and therefore can be used if they need to challenge the submission held by the HM Revenue & Customs (HMRC).

Cis Return Statement

The Cis Return Statement report provides a concise overview of CIS deductions withheld for subcontractors, detailing deductions by subcontractor throughout the selected Retention Tax Period. A similar report is available for statement lines individually, while this report offers an extended summary for the entire period.

Fixes and minor adjustments

#135 Added ‘Quarterly’ option for retention tax period calculation type
#130 Document No field on Posting Preview has GUID value

2.7 (January 2024)

Fixes and minor adjustments

#89 Allow changing posting groups on purchase documents
#112 Validation of HMRC setup data
#113 CIS subcontrator data validation
#115 CIS Vendors default to “Sole Trader” after upgrade to 2.6 version
#116 CIS requirements are checked even in IE companies using RCT
#124 UI: Dedicated fast tab for Ret.Tax
#125 Set fields enabled/disabled according to new field Tax Schema in the Ret. Tax Setup
#126 Adjust Accounting By field according to the Tax Scheme
#131 Posting Credit Memo with posting setup combination marked Exempt not working correctly
#132 Applying with Credit Memo doesnt work properly - wrong sign for Expected Amount

2.6 (December 2023)

Application enhancements

Verify Subcontractors Online for CIS

Now, you can easily verify subcontractors online before your monthly return. This integration with HM Revenue & Customs (HMRC) simplifies the process of confirming tax status and compliance for each subcontractor.

Report Inactivity

You can request inactivity automatically in CIS for a period of six months. When you no longer make payments to subcontractors, check the option field on Submitting Retention Tax Period. The CIS system will not issue any further returns during the inactive period.

Fixes and minor adjustments

#90 Word layout for CIS Subcontractor Statement
#94 Order lines for expenses do not get a tax retention posting group

2.5 (October 2023)

Application enhancements

Online Tax Retention Submission for CIS

Tax retentions is now possible to submit directly from the Business Central application to the HM Revenue & Customs (HMRC) online. To use the new feature, ensure prior HMRC verification to update HMRC Settings with the data.

2.4 (September 2023)

Application enhancements

Subcontractor Statement

Exempt from retention and reporting

The new option to exempt certain groups from the base amount can be found as a new field “Exempt” in the posting setup. Marking this field will fully exempt the combination from inclusion in entries and reporting.

Additional fields in the entries

Fields for submission date, vendor name and period number has been added to transactions.

Fixes and minor adjustments

#43 Enhancement: Block closing of non-consecutive periods
#48 Error when more than 215 subscontractors are included in a statement
#49 Enhancement: Detailed Ret Tax Entry added to Preview Posting

2.3 (June 2023)

Fixes and minor adjustments

#1236 Description missing after posting rellocation
#1237 Fix for error on direct posting check
#23 Transactions can be posted into closed Retention Tax Periods
#25 CIS Vendor Verification is not checked when paying multiple vendors
#27 CIS vendor verification not checked when creating a bank file
#28 Gross registered CIS vendors not included in submission

2.2.1 (June 2023)

Fixes and minor adjustments

#1255 Error on closing retention tax period when detailed amount equals zero

2.2 (May 2023)

Application enhancements

Retention Tax Category

The new field Retention Tax Category in the retention tax setup has been added. It’s specifically designed for the Construction Industry Scheme (CIS). This improvement enables users to categorize retention taxes, providing a more streamlined and efficient process of reporting CIS-related tax obligations.

Fixes and minor adjustments

#1238 CIS: Periods with zero amount withheld cannot be closed
#1239 Hiding Retention Tax Business Posting Group on purchase documents
#1136 Entering total/heading account numbers in Ret. Tax Posting Setup shouldn’t be possible
#1232 Retention tax entries are not created when the rate is 0%
#1231 When posting an invoice for an un-verified CIS vendor the user must confirm the posting
#1230 When posting an invoice for CIS vendor, an incorrect Retention Tax Period is created
#1228 Payments can be made to contractors that are not verified
#998 Retention Tax Periods should be able to start on custom date set in the Retention Tax Setup
#995 Close retention tax entry on closing retention tax period