HM Revenue & Customs changed the tax system for the construction industry in April 2007 with new CIS rules.
Pegasus Construction Industry Solutions, a portfolio of software solutions specifically designed for the construction and allied industries, are available now. Not only will they make you fully compliant with the taxman, they’ll also bring astonishing efficiencies to your contract management.
When you consider that the average construction project suffers 150% cost overruns and completes more than 175% late, there’s clearly a great need for software that can help you to deliver projects on time and within budget – and transform your profitability.
Visit www.new-cis.com for HMRC information relating to the new Construction Industry Scheme, including frequently asked questions.
To learn more about Pegasus CIS, see below::
Keeping you on the Level
Taking Control of Contracts and Costs
Simplifying Administration and Improving the Cost Controls on Contracts
Contract Costing Software for the Construction Industry
Sophisticated and Flexible Analysis
Sophisticated Financial Reporting
Contract Sales Ledger
Subcontractors Ledger
Labour Costs
Contract Purchasing
Linking Pegasus CIS to your Accounting Solution
Nominal Ledger Integration
Stock Control
Impressive Functionality
Keeping you on the Level
Pegasus Construction Industry Solutions (CIS) is a portfolio of solutions specifically designed for the construction and allied industries; providing complete control over all aspects of contracts management, from costing and timesheets through to payment applications, VAT invoicing and cash receipt matching. Fully integrated to the Sales, Purchase and Nominal Ledgers, Cashbook and Payroll, Pegasus CIS conforms to the requirements and regulations of HMRC's Construction Industry Scheme, which came into force in April 2007.
Pegasus CIS recognises the complex business requirements of the construction sector, offering an unparalleled level of management control over contracts and subcontractors. It integrates with Opera II, Sage Line 50 and Sage MMS.
Pegasus CIS
Taking Control of Contracts and Costs
It has been estimated that the average construction project suffers 150% cost overruns and completes more than 175% late*. Investing in the right software could help transform this into a more profitable proposition where projects are delivered on time and within budget. Pegasus CIS provides an unparalleled level of management control over your contracts and subcontractors.
Simplifying Administration and Improving the Cost Controls on Contracts
Controlling the costs of a project can be a daunting task for many companies in the construction industry. Not only do businesses need to track the costs of purchases, there may be sub-contractors who need to be paid under HMRC's Construction Industry Scheme regulations, as well as raising and chasing the Payment Applications to clients. Has a Payment Application been Premier? How much is the Main Contractor Discount? When is the Retention due for payment? How much profit did you make on that job? These are the typical questions asked, but quickly getting the answers can be the problem when running a construction project.
Effective cash management is key to making a profit in a contracting environment. Pegasus CIS has been specifically designed to give instant access to up-to-date information that allows you to manage your contracts. Knowing what is owed and when it is due and who needs to be paid and when, are critical issues. Pegasus CIS addresses these and many others as part of its effective management of your contracts.
Pegasus CIS: a closer look
Contract Costing Software for the Construction Industry
Pegasus CIS is a contract costing system that has been specifically written for small to medium sized (SME) contractors in the construction and allied industries, giving complete control over every aspect of contract management. Designed for SME construction companies, Pegasus CIS eases the administrative burden of running construction projects, whilst providing all the management tools necessary to ensure that all critical information is readily available to the management team.
The system allows direct costs to be input against a contract, as well as costs derived from labour timesheets, purchases, stock and from sub-contractors. A wide range of analysis reports are available, giving businesses views of the current status of contracts, including job performance and detailed profit analysis reports
Cost control is critical in the construction industry: effective cash management can make a serious difference to the profit on a contract. Pegasus CIS captures all relevant contract information across all stages of a job so that the status of the contract is immediately available.
Sophisticated and Flexible Analysis
The Management Information System (MIS) facilities that are available across the whole of the Pegasus CIS range easily adapt to the analytical requirements of a business. The MIS features make it easy to analyse key information, such as costs or revenues, by Contract, Project, Analysis Codes, Cost Head, etc. Budgets and estimated costs can be specified at Cost Head level while the system will maintain the Opening, Actual, WIP, Committed and Other Costs. The financial position is always available and can be analysed and interrogated using the highly configurable and user definable dynamic view screens.
Sophisticated Financial Reporting
The MIS facilities in Pegasus CIS not only provide extensive financial reporting facilities, it also includes export features to Microsoft Excel. It is an intuitive addition to the capabilities of Microsoft Excel and provides powerful and adaptable access to the information held within both Pegasus CIS and the accounts system. With its flexibility, ease of use and advanced drilldown capabilities, Pegasus CIS delivers fast and accurate information; this provides enhanced analytical power, which assists and simplifies even the most complex decision-making process. Purpose-built functions allow dynamic access to data from the Pegasus CIS system to populate Excel worksheets.
Contract Sales Ledger
Pegasus CIS includes a self contained Contract Sales Ledger that works in conjunction with the accounts Sales Ledger. The Contract Sales Ledger maintains details of the current Payment Applications, together with all previous Applications; it also contains information on current and cumulative revenue values, together with retention, main contractor discount, contras, etc.
Payment Applications can be printed, 'Premier' and payments recorded, invoices generated and retentions tracked. When the payment is received it can be entered in batches and allocated to one or more Applications. For Applications, VAT is taken into account at time of payment. It is also possible to create standard invoices, where the VAT is recorded at the date of invoice.
Knowing when payments are due is critical to successful management of cash flow within any organisation. Pegasus CIS comes with a comprehensive aged debt reporting features to allow these payments to be monitored.
Subcontractors Ledger
Pegasus CIS includes a Subcontractors Ledger that combines the functionality of a Purchase Ledger with the regulatory requirements of HMRC's Construction Industry Scheme. Full information on CIS approved sub-contractors are recorded, including details of their CIS Certificates and expiry dates. Pegasus CIS provides full Construction Industry Scheme reporting for both monthly and annual returns.
Subcontractor Applications for Payment can be entered, detailing both current and cumulative values of net, gross, discounts and retentions for the specified contract. When a Subcontractor Application for Payment is approved, it is possible to produce a Payment Certificate that can be sent to the sub-contractor with the payment, together with the relevant CIS vouchers. There is also a separate posting routine for timesheet only subcontractors.
Pegasus CIS conforms to the requirements and regulations of HM Revenue & Customs (HMRC) Construction Industry Scheme — both now and when legislation changes in April 2007.
What are the legislation changes?
CIS Registration Cards and Certificates will no longer be used; contractors must verify that any new subcontractor is registered with HMRC.
As part of the verification process, a higher rate tax deduction of 30% will be assigned to subcontractors if they cannot be matched to records on the HMRC system. Subcontractors will still be paid net or gross of tax, but HMRC will specify which as part of the verification process.
Vouchers and Year End returns will be replaced with a CIS300Monthly Return which can be filed online, on paper or as anelectronic submission. This details payments and deductionsmade to all subcontractors. When there have been no paymentsmade to subcontractors in a month, nil returns must be made.A declaration is signed that states the contractor has checked theemployment status of each subcontractor, and payments havenot been made under contracts of employment.
Most subcontractors that are registered under the existing CISrules will automatically be transferred over to the new systemand will not need to re-register.
A penalty will be charged for late CIS300 Monthly Returns andwill be based on the number of subcontractors on the late return.This penalty repeats for each month that the return is late. A latesubmission of a nil return automatically attracts a £100 penalty.HMRC also state that where the return is received late, thecontractor's own gross status as a subcontractor may be at risk.
Pegasus CIS will enable you to take advantage of new levels ofcontrol and reporting, preparing your business for a smoothtransition to the new legislation.
Labour Costs
It is possible to enter employee timesheets directly into Pegasus CIS, post these costs to the contract and post these timesheets into the Payroll so that payslips are produced. The timesheet data-entry routines are fully optimised for fast entry of data, ideal for those companies that need to process large data volumes. For those companies that prefer to enter timesheets in the Payroll, it is possible to export them out of the Payroll and post them into Pegasus CIS.
Once the Payroll has been run it is possible to post the 'on-costs' into Pegasus CIS. This means that additional costs such as National Insurance, Pensions, CITB Levies, etc can be posted back into the contracts. It is therefore possible to post labour to a contract as a charge-out rate, or as net or gross costs.
Contract Purchasing
Pegasus CIS includes a Purchase Order Processing system that allows committed costs of a contract to be monitored by raising purchase orders against that contract. As deliveries are received and invoiced the purchase order is updated, so maintaining an accurate picture of the committed costs. It is possible to arrange for deliveries to be made directly to site, knowing what is still to be delivered; all of which contributes to better site management.
The system is flexible, so that that it is possible to turn off the Goods Received Notes section and simply raise purchase orders and match the incoming purchase invoices. Purchase invoices that do not need to be directly related to a contract can be allocated directly to a nominal account.
Linking Pegasus CIS to your Accounting Solution
The following diagram details the main data flow between Pegasus CIS and Opera II. It is also possible to integrate Pegasus CIS into Sage Line 50 and Sage MMS accounting systems.
Nominal Ledger Integration
Pegasus CIS is fully integrated into the accounts system; the prime requirement is to eliminate any double posting of transactions so that no manual posting is required. All transactions posted to the Nominal Ledger are stored in an audit file for analysis and reporting.
Purchase invoices entered into Pegasus CIS are posted to the contract and to the accounts Purchase Ledger, handling both the Nominal Ledger and VAT allocations. Similarly, sales invoices produced within the Contract Sales Ledger are posted to the account Sales Ledger. Other transactions posted to a contract, including timesheets, will raise an entry in the Nominal Ledger. A transaction posted into Pegasus CIS that has an effect on the P&L, Balance Sheet, VAT account or Cashbook has a Nominal Ledger Journal created, using the default Nominal Ledger account codes, which are set up in the system.
Stock Control
Integration between Stock Control and Contracting Purchasing allows stock to be ordered from suppliers against contracts. Stock can be Allocated, Reserved and Issued to a contract, posting relevant costs to the contract. When Allocating stock to a contract it is possible to nominate the period in which that allocation is required. This is extremely useful where there is a requirement to plan stock issues to a contract based on when it will be required.
Stock can hold up to three dimensions (such as length, breadth, height) which can be used on the purchase order to calculate and allow ordering in square metres, for example. The stock system is multi-location, so it is possible to look at all stock in a warehouse or at a site.
Monitoring stock levels, knowing where stock is located and knowing what needs to be ordered and when, are all elements managed within the Pegasus CIS Stock Control module.
Impressive Functionality
The functionality of Pegasus CIS is astounding. It is an application that covers all the requirements of contract costing, handling all of the revenue and costs associated with running a contract, controlling materials, purchase orders and purchase invoices, through to the regulatory requirements of HMRC's Construction Industry Scheme. Fully integrated into the accounts system and payroll, Pegasus CIS truly transforms a business' ability to profitably manage contracts.
Pegasus CIS Subcontractors Edition
Overview
Pegasus CIS Subcontractors focuses on controlling all aspects of subcontractor administration, enabling any company that operates under the HM Revenue & Customs Construction Industry Scheme to efficiently manage payments, tax and retention while covering all of the legislative requirements.
Pegasus CIS Subcontractors is an ideal solution for contractors who use subcontract labour on their Jobs and need to efficiently handle HM Revenue & Customs (HMRC) legislation that governs the use of these subcontractors. Pegasus CIS Subcontractors controls all aspects of subcontractor administration from subcontractor verification, invoice / timesheet / application entry and payment, through to generation of the figures required on monthly returns to HMRC & submission of these via the online services.
Using Pegasus CIS Subcontractors not only offers control over payments and handles the tax requirements of the Construction Industry Scheme, but also calculates and submits these on the monthly returns to HMRC, ensuring returns are accurate and made on time. The time saving, accuracy and online submissions are key to any company that operates under the HMRC Construction Industry Scheme.
Pegasus CIS Subcontractors not only manages all aspects of using subcontractors, but also integrates into the Contract Costing system to provide powerful and comprehensive reporting of these subcontractor costs against jobs and customers.
Pegasus CIS Subcontractors fully integrates with Opera II, Sage Line 50 and Sage MMS and links with the Nominal Ledger, Cashbook and Customers.
What’s the difference between Pegasus CIS Subcontractors and the full Pegasus CIS Enterprise solution? While Pegasus CIS Subcontractors manages the subcontractor element of contracts, Pegasus CIS Enterprise is a fully integrated Contract Costing system that manages all of the financial aspects of running a contract. In addition to the features offered by Pegasus CIS Subcontractors, Pegasus CIS Enterprise also allows the entry of costs from suppliers, direct labour, stock and other areas such as petty cash, together with sales revenue from both Invoices and Applications/ Certifications.
Subcontractors
The functionality in the Pegasus CIS Subcontractors module is identical in every way to the module included in the full Pegasus CIS Enterprise solution. It provides comprehensive facilities to automate the administration of subcontractor orders, invoices, timesheets, applications, certification and payments. Management information can be produced that details a complete analysis of monies owed, committed costs, retentions and discount taken, by Subcontractor and Job.
If using the Subcontractor Applications process then it is possible to record the current Application values, while having the ability to look at the cumulative Applications received on a per Job basis. In real life, contractors will typically use their main subcontractors on more than one job, each with different labour and material splits. For this reason, the Pegasus CIS Subcontractors solution also provides a comprehensive Contract Costing system.
Jobs
The inclusion of the Job Costing system in the Pegasus CIS Subcontractors solution acts as a contract management system for those contractors who subcontract most of their work.
Administration
The Administration system provides all the processes and commands required to operate Pegasus CIS Subcontractors as either a stand alone or as a fully integrated Subcontractors system.
Construction Industry Update
For any construction company, it is critical to adhere to the rules of the Construction Industry Scheme; getting it wrong can be costly in terms of deductions and surcharges. This is even more important with the increased scrutiny from HMRC as part of their efforts to recoup the £130m they believe should be collected in extra taxes from the construction industry.
What are the changes to CIS?
One of HMRC’s aims, apart from increasing tax revenues from the construction industry, is to encourage companies to submit returns online. This is of benefit to HMRC but is likely to be a cost to a contractor because they will need to update their systems and software to generate the required information.
The main changes:
CIS Cards and Certificates will no longer be used, instead contractors must verify that any new subcontractor is registered with HMRC. This can be actioned online.
Subcontractors will still be paid net or gross of tax, but HMRC will specify which, as part of the verification process.
There is also a higher rate tax deduction of 30% that can be assigned to subcontractors if they cannot be matched to records on the HMRC system, as part of the verification process.
Vouchers and Year End returns will no longer be required; these will be replaced with a CIS300 Monthly Return which can be filed online, on paper or as an electronic submission. This details payments and deductions made to all subcontractors. Even when there have been no payments made to subcontractors in a month, nil returns must be made.
The CIS300 Monthly Return requires a declaration to be signed that states that the contractor has checked the employment status of each subcontractor, and that payments have not been made under contracts of employment.
Most subcontractors that are registered under the existing CIS rules will automatically be transferred over to the new system and will not need to re-register.
Failure to submit the CIS300 Monthly Return on time will result in a penalty being charged, based on the number of subcontractors on the late return. This penalty repeats for each month that the return is late. A late submission of a nil return automatically attracts a £100 penalty. HMRC also states that if the return is received back late, the contractor’s own gross status as a subcontractor may also be at risk.
Employment Status
One of the first things that needs to be reviewed is the employment status of subcontractors. Can you tell the difference between one of your subcontractors and one of your employees? It is necessary to decide whether a person works under a contract of service (employees) or under a contract for services (self-employed, independent contractor). There is no statutory definition of these terms, it is the relationship between the parties that matters. You can find useful information on employment status by visiting the HMRC site at www.new-cis.com.
This is important, because under the new CIS system the contractor will be signing each monthly return to say that this has been done. If the information is incorrect this could potentially put the company at risk of penalty for each return submitted.
Monthly Returns
It is critical to get the CIS300 Monthly Return in on time because you will face penalties for a late return. Contractors who miss the deadline will be charged an automatic £100 penalty. If the return shows more than 50 subcontractors paid in a month, there will be an additional £100 penalty for every 50 subcontractors. These penalties will be changed for each month that the return is late. Even a late nil return will incur a £100 penalty.
In addition to the penalty for a late return, there will also be a £3000 penalty for an incomplete or incorrect monthly return where the omission or error was caused by negligence or intent. This can include subcontractors or payments being omitted from the return, or incorrectly entered. There is also a requirement to provide net paid subcontractors with a statement of the deduction for each payment or on a monthly basis. Failure to produce these documents will also incur a £3000 penalty.
If a contractor receives gross payment for any work carried out as a subcontractor, then failure to adhere to the new CIS rules can put this gross status at risk. This compliance test is similar to the current system, but the qualifying period is 12 months to the date of application for gross payment, not 36 months as at present. There are no renewals of this application, but HMRC can cancel a company’s registration for gross payment with only 90 days notice. The reason for cancellation might include making more than two late monthly submissions or two late payments of PAYE/NICs/CIS deductions: a costly oversight!
What should you do now?
Some things that you should look at:
Decide who is going to be responsible for ensuring the employment status of your subcontractors is correct and that there is no false self employment.
Decide who will be responsible for signing the declaration section of the CIS300 Monthly Return.
Decide who is going to be responsible for managing the transition from the old to the new CIS system.
Evaluate software that can help with the management of your subcontractors and that adheres to the new CIS rules.
It is fair to say that a lot of these requirements form part of both the current and the new CIS system. The main difference is that you will now have to handle two rates of tax that can be deducted from your net paid subcontractors. You must collate the data together and ensure that the new monthly return is submitted on time, plus you must sign a declaration stating that you have verified the employment status of all subcontractors paid that month and you need to produce payment certificates to each of those subcontractors. Remember, that taking on any new subcontractors will require you to verify their tax status with HMRC, if they cannot be verified then HMRC will issue a unique Verification Number that must be included on the monthly returns.
How can Pegasus Construction Industry Solutions help?
Pegasus Construction Industry Solution comes with a Subcontractors module that allows you to setup subcontractors details and assign their CIS status. When a Payment Application or subcontractor timesheet is recorded, the system will automatically calculate their tax liability based on this CIS status. Should you decide to certify and pay a subcontractor, Pegasus CIS will produce the payment certificate together with the cheque or BACS output. When it comes to producing the CIS300 Monthly Return, Pegasus CIS will accurately give you all the details of the payments and deductions made to subcontractors in that month. This data can be submitted electronically to HMRC or you can take the figures and enter the information online or onto the paper return. You need never be late with this return when using Pegasus CIS!
However, Pegasus CIS offers much more than a Subcontractors Ledger, it is a contract costing system that has been specifically designed for the construction industry. Not only does it control all of the costs of a contract, it also controls all of the revenue so that you can see the financial performance of all of your contracts. As part of the Contracts Sales Ledger the system allows you to enter Payment Applications, print, certify and produce the associated invoices, handling both the retentions and main contractor discounts.
Pegasus CIS is a powerful contract costing system designed to give you complete management control over your contracts. It controls the whole process from Payment Applications and invoicing through to cost entries from subcontractors, purchases, stock, labour etc. Pegasus CIS comes with state-of-the-art data analysis and reporting tools that provides you with the information you need when you need it.
