What Expenses Can Be Claimed When Self-Employed? If you are self-employed you are probably wondering what expenses you can and cannot include in your Tax return to claim back a Tax rebate. Here we have a summary that may help you along the way. To ensure you receive the best possible Tax rebate it is […]
CIS Tax Returns
CIS Tax Refunds
Those subcontracted in construction under CIS are often due annual Tax rebates. This is mainly because too much Tax has been deducted from the sub-contractors payments. Over the course of the year, the Tax deductions can add up and the Tax overpayments can go into the thousands. Your Tax overpayment is reclaimed through your CIS Tax return.
How Do I Get Started With My CIS Tax Return?
First of all you need to get as much information pulled together as possible. The more information we have concerning your construction work, the better the chance we have of maximising your CIS claim. Documents and records that you should be looking for would include:
- Copies of CIS Tax statements (sometimes called CIS vouchers or even pay slips)
- Details of the sites or places where you have worked
- Copies of MOT certificates showing your mileage
- Copy invoices or receipts for expenses (this can be a lot)
- Invoices or receipts for tools and equipment
- In some cases, copies of your bank statements
The list of expenses you can claim when you’re self-employed as a contractor is quite extensive, hence the more information we have, the better it is for yourself. Don’t worry, however, we will run you through what can be claimed, and what can’t.
What Is CIS?
CIS (Construction Industry Scheme) is a special Tax scheme that was introduced by HMRC to help end the “cash in hand” labour that was a problem in the construction. The CIS rules state that if you are a contractor paying other sub-contractors, CIS Tax deductions should be withheld from the sub-contractors invoices and paid to HMRC.
The sub-contractor when filing his Tax return can then claim the CIS deductions back, and offset this against their Tax for the year. Quite commonly, after various expenses have been claimed, we find that the sub-contractor is due a CIS Tax refund. This is simply because more Tax was deducted than required.
By claiming the maximum allowable expenses, this will maximise your CIS Tax rebate at the end of the year.
What Records Should I Keep?
First of all, you should remember that keeping good records helps you claim more Tax back! Potentially each receipt could be worth 45% in face value when it comes to preparing your Tax return so make sure you keep them safe.
A lot of self-employed CIS workers keep their own records on an accounting spreadsheet. Our CIS spreadsheet will give you an idea of what you can claim, and will hopefully make the book-keeping process easier for yourself.
Alternatively, you can simply purchase a notepad and manually record your expenses yourself. We highly recommend the Simplex D cash-book if you prefer to keep a paper based system.
By keeping proper CIS Tax records, it will ensure that we will have the right information at hand for the preparation of your CIS Tax return.
Can I Make a CIS Tax Claim Myself?
Whilst filing your Self Assessment Tax Return isn’t the most difficult process for some people, are you really sure you are claiming all allowances and entitlements? Commonly we come across individuals that have filed their own Tax returns, and even people that have had prepared by other accountants, and find that some allowances have not been claimed. These Tax return errors could be due to an oversight, or lack of knowledge surrounding the CIS industry.
With QuickRebates you can have peace of mind that we will go through your situation in fine detail ensuring that your claim is maximised to it’s fullest possible potential. We are a team of Tax experts who know the CIS industry extremely well. Having served thousands of clients and obtaining back millions of pounds in Tax repayments, we have the experience you need in sourcing a large Tax rebate.
What is a CIS Statement?
A CIS statement is a payment and deduction statement issued by a contractor to a sub-contractor. They are usually issued on a monthly basis and summarise what payments have been made to the CIS subcontractor. They replaced the old CIS vouchers or slips.
CIS statements can be used as proof that you have paid CIS Tax on your construction earnings. Therefore it is essential that you keep them safe. If, whatever the reason, you cannot find your CIS statements, your contractor will usually be able to re-issue copies without any hassle.
The CIS statement would typically show the following details:
- Contractor details, such as name, Tax reference and address
- The month for which the statement covers
- Subcontractors details, such as name, Tax reference, address and verification number (if applicable)
What is a Subcontractor?
With reference to the CIS scheme, a sub-contractor is someone that performs construction work for a contractor, and is not employed under PAYE. A subcontractor would typically invoice the contractor for their work performed, although the contractor can raise “self-billing invoices” taking this paperwork duty away from the sub-contractor. The contractor would then check the sub-contractors details with the HMRC to confirm what Tax deduction rate should be applied.
A subcontractor is different to an employee in that often the work is project based, serving a short purpose. For example, bricklaying services for a house development project. Subcontractors would often also use their own tools and equipment and perhaps also be required to supply the materials.
Subcontractors are self-employed businesses in their own right with their own Tax returns and accounts to prepare.
How Fast Will My Tax Come Back?
The length of time taken to get your Tax rebates depends on a few things:
- How fast you can pull the required information together
- How busy HMRC are
- The complexity of the claim
CIS Tax returns are “usually” straight forward and tend not to throw that many problems, certainly not issues that would cause a delay. All things being well, we would aim to have the CIS rebate filed within 48 hours of having all of the information needed.
Depending on what time of the year it is, you could get your repayment back within weeks, sometimes a little more than that. For example January, February & April are busy times for HMRC and it could take them around a month to process your CIS Tax rebate. On the other hand, June to November are relatively quiet times and we have known repayments take just ten days.
What are the CIS Deduction Rates?
Three rates of CIS deduction apply to payments made in the CIS scheme:
- 20% – the most common payment for CIS registered small sized sub-contractors
- 30% – the rate applied when you are not registered as a subcontractor with HMRC, or they cannot find your record
- 0% (Gross payments) – No Tax deducted. To obtain this level of CIS registration various checks are performed by HMRC
If you find yourself paying Tax at the higher rate of 30%, you should contact HMRC immediately to have yourself correctly registered. This will allow your contractor to make payments at the standard rate of 20%.
Applying for gross CIS status can be quite cumbersome but if doing so frees up vital cash flow, then this should be applied for.
How to Register as a Subcontractor?
To register as a self employed subcontractor, you first need to apply for a UTR number. This can be done through ourselves or directly with HMRC.
The UTR number typically takes around two to four weeks to be issued, but can take longer if HMRC are busy or have a backlog.
Once your UTR number has been issued and you are working in the Construction Industry as a subcontractor, you should then register as a self employed subcontractor with HMRC. This can be done by calling the Tax office on 0300 200 3210 and selecting option 2, then option 4.
If you do not register correctly as a CIS subcontractor, your Tax deduction rate may be set at 30% instead of the lower rate of 20% and you will not be able to claim this back until after April on your CIS Tax return.
What Expenses Can I Claim?
Working in the construction industry can involve a fair amount of costs, most of which are allowable to be offset against your income when calculating your Tax for the year. Examples of allowable expenses would include:
- Tools and equipment
- Mileage and general travelling costs
- Capital allowances for your commercial vehicle
- Clothing costs
- Materials required for the project
- Administrative costs such as stationery and telephone
- Advertising expenses
- Many other costs
When it comes to processing your CIS Tax rebate, it’s a situation where the more information supplied, the better. Having all of the information concerning your subcontracting rebate will allow us to assess what is allowable, and what isn’t. Our job is to obtain the largest possible Tax rebate on your behalf.
How Do I Register for CIS?
To register for CIS, first you must make sure you are registered self-employed. Both can be done at the same time online with HMRC here. Alternatively, you can contact HM Revenue & Customs by calling 0300 200 3210.
If you are already registered as self-employed the process of registering as a subcontractor will generally be straight forward. You should make sure that you have all of your information ready, including:
- Your intended date to start as a subcontractor
- Your National Insurance number
- Your Unique Taxpayer Reference (UTR)
Should you prefer not to deal with HMRC we can look after your self employed and CIS registration. Please contact us to find more information.
How Do I Deregister as a Subcontractor
If you are confident that you will not be undertaking any more work as a subcontractor, you should inform HMRC at your earliest convenience so that they can remove you from the subcontractor records.
You should either do this in writing or over the phone by calling 0300 200 3210. Deregistering as a subcontractor will not deregister you from being self-employed. If you want to close your subcontract CIS business, you should note the trade cessation date on your personal Self Assessment Tax Return. If you do not record your cessation date, HMRC will think you are still trading and will issue you Tax Returns to complete unless they are told otherwise.
All of the necessary UK Income Tax and National Insurance rates and allowances for the Income Tax year 2018/19 – fiscal year ending 5th April 2019.
Tax refunds are great, everyone loves a Tax rebate from HM Revenue & Customs. In many situations overpayments of Tax occur without the Tax payer knowing, or even HMRC having any knowledge. Because of this, they never get paid but get swallowed up by the Tax office over time. You don’t even need to register […]