CIS Subcontractor Tax Returns
Subcontractor Tax Returns
Subcontractors that work in the Construction Industry Scheme (CIS) are required to complete a Self Assessment Tax Return. Subcontractors will be naturally registered as self employed in order to receive payments under the CIS Scheme. Construction Tax returns are very similar to standard Tax returns but with the added spin of having CIS Tax deducted at source.
How Do I Prepare a CIS Tax Return?
A Subcontractor Tax Return is an extension of a standard personal Tax return with the added complication of Construction Industry Tax (CIS Tax) being deducted from some or all of your income. You should make sure that you have the following information to hand when preparing and assessing your Taxable subcontractor profits:
- Copies of CIS statements or vouchers/payslips
- Details of expenditure, including stock purchases, tools, motoring expenses, admin costs, any other charges you may have incurred during the course of your trade
- Information covering other personal income
Your CIS Tax return can be submitted online by 31st January, or if done on paper it must be received by HMRC by 31st October.
Will I Have More Tax to Pay?
For those working in the CIS industry and have 20% Tax deducted from their income, in most circumstances you will be due a Tax refund. This is due to the amount of allowable expenses you can claim to reduce your taxable income. For the majority of cases, the 20% Tax is more than the Tax you should pay on your taxable profits. The excess of Tax paid equals your Tax repayment.
It might be possible that you have applied for Gross CIS status, which means that no Tax is deducted from your contractor payments. If this is the case, then it is most likely you will have a Tax liability. The amount of sub-contractors with gross CIS status is very small, it is most likely that you have paid CIS Tax on your income. But you should refer to your CIS statements to confirm the Tax deductions.
My Friend Got More Tax Back Than I Did?
A question raised quite a lot by people working in the subcontracting industry is “how come my work colleague got more Tax back than I did”. Without knowing your colleagues personal Tax situation, it is not possible to explain why. There are a number of reasons why this might happen however:
- Everyones Tax repayment claim is different
- They could have suffered more costs through the year on stock and materials
- They may have claimed more capital allowances on assets used for the trade
- It is possible they could have been entitled to more allowances
- Likewise with your own Tax return, you might not have claimed all allowable expenditure and reliefs
If you feel that something is not quite right with your previous Tax repayments, please do not hesitate to get in touch and we will conduct a free Tax review to see whether you have received the right amount of Tax relief.
Penalties for Inaccurate Subcontractor Tax Returns
As you probably know, HMRC issue penalties for late Tax returns. In addition to this, they can also issue penalties for inaccurate returns. This inaccuracy penalty can be up to 100% of your Tax due.
On this basis, it is highly recommended that you leave the preparation of your Tax return to Tax experts in the industry. Not only will you have peace of mind that your subcontractor Tax return will be processed on time, but also that every possible allowable expenditure will be claimed, maximising your repayment due.
Like with Tax rebate claims, HMRC also have the power to go back four years for errors on your Tax returns. It is therefore essential that these are prepared and submitted as accurately as possible.