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Month: December 2023

Construction Industry Scheme

Construction-SchemeWhat is the construction industry scheme?

Construction Industry Scheme (Often shortened to CIS) is a scheme put in place by HMRC in 2007 where contractors deduct a percentage of money from a subcontractors payments which is then passed on to HMRC.

The scheme only requires contractors to register however subcontractors are advised to register as unregistered subcontractors have a higher rate deducted from their payments.


Why should a Subcontractor register with the scheme?

Subcontractors are advised to register with the scheme to reduce the rate of deduction from their payments. Unregistered subcontractors must have 30% deducted from their payments whereas once registered, this is reduced to 20% deducted. Please note the contractor is liable for any errors within the deductions made and ensuring the subcontractor is verified.


How do I know if I am a contractor or subcontractor?

You are a contractor if you pay subcontractors for construction work and/or your business doesn’t do construction work but you spend an average of £1 million or more a year on construction within any 3 month period.

You are a subcontractor if you complete or aid completion of any construction work for a contractor.


How are the CIS Returns submitted?

All contractors must submit a monthly return to HMRC by 19th of each month. This return can only be submitted online via the HMRC website. If the return is nil this still needs to be submitted however this can be submitted on the phone.

When submitting the monthly return contractors must make sure throughout the month they have deducted the correct rate from their subcontractors. These subcontractors can be verify online where you will need their Unique Tax Reference (UTR), Trading Name, National Insurance Number (if they are a sole trader) OR Company Registration Number (if they are a limited company).


What if I miss the submission date?

If a CIS return is submitted late HMRC will issue a penalty depending on how late it is.

For any returns submitted later than this an additional penalty can be issued of £3000 or 100% of the CIS deductions on the return, whichever is higher.


When and how does a contractor pay this?

Once the monthly return is submitted by the contractor, the total of the deducted amounts must be paid to HMRC by 22nd of the SAME month (by 19th if you’re paying by post). This can be paid by any of the below.

  • Direct Debit
  • Online or Telephone Banking
  • Online Card Payment
  • BACS
  • Post
  • Cheque


What if subcontractors pay too much?

Contractors throughout the year must provide each subcontractor with a Payment and Deduction Statement. This statement should show a breakdown of what was submitted on the monthly return.

Sole Trader

  • If the subcontractor is a sole trader the CIS deductions are recorded on their Self-Assessment Tax Return.
  • HMRC will then work out your Tax and National Insurance bill for the year taking off any deductions suffered.
  • If tax is still owed then you must pay this by 31st If an overpayment has been made a refund will be issued by HMRC.

Limited Company

  • If the subcontractor is a limited company you will need to submit your monthly Full Payment Submission (FPS) as usual.
  • The subcontractor will then need to send in an Employer Payment Submission (EPS) at the end of the tax year showing all deductions suffered throughout the year.
  • HMRC will take the deductions off what you owe in PAYE and National Insurance


If you have any queries regarding this please feel free to contact us.




What do your numbers tell you?


To enable us to appraise the performance of a business there are a number of financial performance indicators that we can use. The key performance indicators (KPI’s) are sometimes referred to as ‘ratios’ and ratio analysis is an important part of how we can understand how well a business is doing. These KPI’s can be set as targets to help manage the performance of the business through the decisions made by management.

There are several categories of ratios that you can look at: profitability, revenue, cost and liquidity

Profitability Ratios:

Margins are a common way of measuring the profitability of a business by considering the profits earned compared to the sales revenue generated. They are sometimes referred to as measures of ‘return on sales’ for this reason.

Margin on Sales

There are two margins that can be calculated:

Gross Profit margin (%) = Gross Profit/ Sales x 100

Net Profit Margin (%) = Net Profit (profits before tax)/ Sales x 100

  • Falling margins may be due to increasing costs or reduced selling prices
  • Differences between the gross profit margin and the net profit margin allow you to establish whether changes in profitability are due to changes in cost of sales or caused by other operating costs
  • Useful for setting prices e.g. increasing your selling price relative to the direct costs will result in an increased gross profit margin.

Return on capital employed (ROCE)

Whilst margins look at profits in relation to sales revenue generated, ROCE looks at profits in relation to investment required to finance the business.

ROCE = Net Profit / Capital employed* x 100

*Capital Employed = Total Assets less Current Liabilities

  • It measures how much profit is generated for every £ of assets employed and indicates how efficiently the company uses its assets to generate profit
  • The only ration that compares profits to the overall size of the business and is sometimes viewed as the most important ratio for analysis purposes

Revenue Ratios:

Average Selling Price = Total Revenue / No of units sold

  • Average price charging for the units that we are selling
  • Can be compared to competitors prices to see how competitively priced your products are

Sales per employee = sales / No of employees

  • Measures the average value of sales generated per employee

Asset turnover = Sales/ Capital employed

  • Measures the value of turnover generated for every £1 of assets employed
  • Measures #efficiency’ of the use of assets that you have invested i.e. are the assets being used to generate adequate turnover


Cost Ratios:

It can be useful to measure how well a business is controlling its cost base as the level of trade grows.

Cost of sales as a % of turnover = Cost of sales/ Sales x 100

  • If increasing as sales increase it may indicate poor cost control and that that the company is growing to quickly
  • If falling as sales increase this may be due to ‘economies of scale’ as volumes rise e.g. bulk purchase discounts.

Liquidity Ratios:

Some ratios help us to consider the cash flow position of the business which is crucial for long term planning. Many profitable businesses become bankrupt due to poor cash flow management.

Current Ratio

This shows if the short-term liquid assets of the business (e.g. cash, trade debtors & inventory) are adequate to cover the short-term liabilities (e.g. Trade creditors Accruals & Tax).

Current ratio = current assets/ current liabilities

  • If it falls year on year it may indicate difficulties with cash flow and that we will have difficulty paying creditors when they demand payment which can lead to bankruptcy.

Average receivables collection periods (debtors days)

This shows how long it takes you on average to collect money from trade debtors. It is important that you collect money quickly as this helps with liquidity and cash flow in order to pay suppliers, staff etc.

Debtors days = trade debtors / Sales x 365

  • If increasing it indicates you are taking longer to collect debts. You may want to consider tightening up credit control or offering settlement discounts to encourage faster payment.

Average payables period (creditor’s days)

Shows how long you take to pay your suppliers

Creditors days = trade creditors / cost of sales x 365

  • By delaying payment to suppliers you can improve your cash flow. However, this can have a negative impact on your relationship with these suppliers.

A ratio figure on its own means very little, to make sense of ratios you need to compare them to something. This could involve comparison with budgets, against previous year figures, against industry averages or perhaps competitors.


Have you ever wondered why the UK tax year starts on 6th April?

In 1582 Pope Gregory xiii grew tired of the inaccuracies in the existing ‘Julian’ calendar and ordered the calendar to be changed. The Julian calendar named after Julius Caesar had been in place since 45 BC.

Caesar’s calendar differed from the solar calendar by 11½ minutes.

This was not a big problem at the start, however, after 500 years this small inaccuracy had started to build up to 10 days off the solar calendar.  With this in mind, Pope Gregory introduced the Gregorian calendar.

The Gregorian calendar reduced the length of the calendar year from 365.25 days to 365.2425, a reduction of 10 minutes 48 seconds per year!

This and a few other tweaks ensured Pope Gregory’s calendar was a much more accurate time keeper. The Gregorian Calendar was then introduced in Italy, Spain, Portugal and what was then the Polish-Lithuanian commonwealth.

The Gregorian Calendar was initially quite a slow burner in the British Empire, it wasn’t introduced until 1752.  By then the British calendar was 11 days off the rest of Europe, with this due to increase as time passed, the British knew it was time for a change.

On the old British Calendar the tax year began on March 25 (the old New Year’s Day).  In order to ensure against losing revenue it was decided by the British Treasury that the tax year, which started on March 25 1752, would be of the usual length (365 days) and therefore it would end on April 4, the following tax year beginning on April 5.

Time passed smoothly and most importantly accurately until 1800.  Unfortunately 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Thus the treasury moved the start of the UK tax year from the April 5 to the April 6 and it has remained there ever since!


HMRC phone scams

You’ll never get an email, text message or phone call from HM Revenue and Customs (HMRC) which:

  • tells you about a tax rebate or penalty
  • asks for your personal or payment information

Reporting suspicious emails, texts or phone calls

You can report something suspicious to HMRC’s phishing team, for example:

  • a text message (forward it to 60599 – you’ll be charged at your network rate)
  • an email
  • details of a phone call asking for personal information or threatening a lawsuit

If you receive a suspicious phone call, you can help HMRC’s investigations by providing:

  • your phone number
  • the caller’s phone number
  • the time and date of the call
  • a brief description of the call

HMRC phishing team’s email address is

Your email address and phone number will be shared with other organisations if that’s necessary to close down the scam.



Are you owed money?

Are you owed money by an individual or a company?

Have you chased your invoice over and over again to no avail?

Do you want to take it further but don’t know how?

Contact Harmonea and they can help.

We can walk you through the steps on how to submit a claim through Money Claim online or submit the claim on your behalf.Facebooktwitterredditlinkedinmail

Are you giving out the wrong message for your business?

I recently saw a leaflet for something I could be have been interested in. At the point of taking the next step I looked for an email address to email to arrange a meeting to discuss their offering. My impression of this business suddenly did a nose dive on the professionability scale. They had a hotmail email account. Was this a part time business? Another person involved in this business had an email address sexysuzy@……. For the cost of a domain running at around £6 for 2 years, why had they not grabbed it?

I then saw that they had a website with the business domain so why were they not using the domain with an associated email address? This person had a good website so I proceeded to email.

Not getting a reply I telephoned the number on the website but it went to the home phone answerphone. Had I got the wrong number?

It took three weeks for an email reply which was full of apology. Was this person taking their business seriously? Could they cope with the work I was proposing to give them?

We met up and he gave me his business card. Oh dear! I think it was a DIY job from Staples and was completely mismatched to the website. It was poorly thought out, poorly printed and was misaligned. It gave incomplete information and contained spelling mistakes.

This business was giving out all the wrong messages before we had had the opportunity to work together.

The meeting went well but the jury is still out as to whether to use him. I have my doubts.

What is the point of all this? This person could have made a much stronger impact with so little effort.

Had he had a consistent brand image – domain, logo, standard of presentation, my impression would have been very different.

Had the telephone been answered by a human or by a professional answerphone, my impression would have been very different.

Had the initial response been earlier and the final proposal sooner after the meeting, my impression would have been very different

By the time we got to the end of the sale process, I had lost confidence in this person which is such a shame. Time will tell if I made the right decision.Facebooktwitterredditlinkedinmail

Is your company dormant?

Dormant Companies are defined in 2 different ways by Companies House and HMRC:

A Dormant company at Companies House is if any transaction goes through the business, then you are not dormant.  There are exceptions to this such as paying the fee for the Confirmation Statement, changes to shareholding etc. meaning if you have bank charges going through when you haven’t made any sales, then your company is not dormant.


HMRC state that if you are not trading then you are dormant meaning if you have don’t have any trading income or expenses you are classed as dormant with them.


If you have any further questions about dormant companies then please let us know.