If you are taxed under CIS and you feel you have overpaid tax, it is time to take back what you are owed. We will guide you through the steps to handle tax as a contractor or subcontractor. Get in touch today.
Your contractor is obliged to withhold tax on its payments to you. Many people under CIS overpay tax as a consequence and need to claim a refund.
What is CIS?
The Construction Industry Scheme (CIS) is where a construction contractor deducts, at source, a portion of the money due to their subcontractor. This is different from other self-employed individuals, who normally receive their payments gross. Whatever amount is deducted is then passed directly to HMRC which is then counted towards the tax and National Insurance of a subcontractor. This effectively pays the tax element in advance.
Registered CIS workers receive their payments net of 20% tax. If a subcontractor is unregistered, they will receive their payment net of 30% tax. It is also possible to apply to receive payments gross.
When will a refund be due?
Where tax is deducted under CIS and you are on a lower income, a refund will normally arise because of the expenses of the trade and because you will normally have personal allowances available.
Get in touch for guidance on the types of expenses that you may be able claim in your tax return. The general rule is that any expenses must be wholly and exclusively incurred in relation to your work. Some of the allowable expenses include vehicle expenses, office costs, plant and equipment, clothing, insurance, and accounting fees. You need to keep records for all expense claims.
How do I get the refund?
The refund process depends on the way you have set up your business.
Sole Traders and Partners – CIS Tax Refund
If you work under the CIS as sole trader or in a partnership, you will need to file a Self-Assessment tax return at the end of the tax year and your refund will be processed as part of this.
Limited Companies – CIS Tax Refund
If you are operating as a limited company and have paid CIS deductions throughout the year, you must claim these back through your company’s payroll scheme. Get in touch for guidance on how to claim the refund via your limited company.
Should I use an accountant to file my tax return and get my refund?
Under CIS, you are faced with having to complete and submit an annual tax return to claim what may be a fairly significant tax refund.
Completing and submitting a Self Assessment tax return can be complex and daunting. You may feel your only option is to pay to use a tax agent to assist you.
If you are on a low income, you may be able to obtain free assistance from one of the tax charities:
Can I get a refund in year?
Yes – via the completion of form CIS40, but this only applies where your work in the construction industry has ceased, and all tax affairs are up to date.
You will still be required to file your tax return for the year in which your construction industry work ceased. If, as a result of the submitting the CIS40, you received a refund, you need to include the amount as a provisionally received refund in the tax return.
There is more information on the CIS on GOV.UK.