As April approaches, and deadlines for tax returns creep up on businesses across the UK, the time for thinking about Construction Industry Scheme (CIS) refunds has arrived.
Did you know that there are many sub-contractors across the UK within the construction industry who are due tax refunds from the CIS?
Philip Owen, director at Rostance Edwards Ltd, a Staffordshire-based accountancy firm, has set out some expert tips in order to help sub-contractors claim their CIS refunds without a hitch.
Register ASAP – To avoid any back-taxes, it’s really important that, whether you are a contractor or sub-contractor, you register with the CIS scheme as soon as possible. Contractors MUST be registered for CIS BEFORE hiring their first sub-contractor.
Know why refunds are due – How are you registered under the CIS system? How much is deducted by a contractor depends entirely on whether a sub-contractor is registered in the system. Unregistered sub-contractors will normally see a deduction of 30%, whilst registered sub-contractors are deducted 20%. These deductions usually mean that your taxes are being overpaid, hence the reason refunds are often due.
Keep this information safe – All of your expenses will need to be proven in order to apply for a CIS tax refund! It is a requirement to keep proof of all expenses, and all tax deducted under CIS. It’s also worth keeping a copy of your bank statements, or downloading copies of electronic statements.
If you are a company you can use a CIS132 form from www.gov.uk, to set off any tax suffered against any tax due, assisting in cash flow and shortening the amount of time in waiting for the CIS refund.
Know your rights – A contractor must give a subcontractor a deduction statement within 14 days of the end of the tax month ie. 19th, where the contractor has stopped tax at source under CIS.
Minimise unnecessary communication with HMRC – The HMRC websites, forms and more can be a nightmare to navigate, so make sure you’re keeping communications with them minimal. Double check that the submitted information is accurate before submitting a CIS return, and, where necessary, check that Unique Taxpayer References and company names are correct.
Know what expenses you can claim for – Many sub-contractors are unaware of these. Allowable expenses include (but are not limited to): accountancy fees, use of your home as an office base, use of a garage (if a vehicle, tools or any materials are stored there), public liability and other commercial insurance premiums, the cost of tools and materials, telephone calls and internet costs used for business purposes, subsistence and accommodation (where a sub-contractor is working away from home), paper, postage and other office consumables.
Avoid the headache – The financial implications of getting CIS wrong are incredibly costly, and can be debilitating to any contractor or sub-contractor. Making sure you get your applications, obligations, and legislations straight can be complicated for even the most competent person, which is why, when you’ve reached a point where trying to figure it all out is causing a headache, we suggest handing it over to a chartered accountant.
When work is undertaken within the CIS, subcontractors get their taxes deducted at source just like PAYE, but these deductions do not take account of allowable expenses or of personal allowances. This is why the majority of those enrolled in the CIS are likely to be due a tax refund each year. Rostance Edwards Ltd believe that there are many workers within the UK who aren’t properly claiming their due refunds, and are urging all contractors and sub-contractors to carefully scrutinise what is being paid, and in turn, what refunds are being given, to those who are a part of the Construction Industry Scheme.