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As a subcontractor in the Construction industry, any contractor for whom you perform work is required to deduct money from your payments and pass it straight to HMRC. If you are a registered subcontractor, 20% is taken from your fee (and should be stated on your invoice). If you are unregistered, the contractor for whom you work will be required to deduct 30%.
The good news is that this often results in subcontractors being eligible for a CIS tax refund from HMRC at the end of each financial year. However, the practicalities of claiming this refund can be complicated. That's why AMR Bookkeeping offers a CIS Refunds service specifically designed to help subcontractors to claim back the correct money they are owed.
The CIS Tax Scheme was launched to avoid instances of tax evasion within the Construction industry. Any company which employs subcontractors must be registered with the CIS Scheme, record any transactions between themselves and the subcontractor, and submit monthly returns to HMRC.
As a subcontractor, you must be both registered as self-employed and CIS registered. You will have to submit the usual self-assessment tax return in addition to supplying information relating to your CIS tax obligations.
Unlike most self-employed workers, in the Construction industry, your main contractor will make your monthly contributions to HMRC. These contributions do not take into account your tax-free personal allowance, nor any other claimable business expenses. It is up to you to retrospectively go over what you have paid and what you are entitled to.
Because the CIS rules require a set amount to be taken each month, it is common for subcontractors to have overpaid tax by the end of the tax year.
In addition to submitting your self-assessment tax return as normal, you will also be required to note any deductions that contractors made on your behalf throughout the year. With the information provided, HMRC will work out your tax bill and National Insurance payment for the year. If they find that you have paid too much, HMRC will refund any overpayment sum back to you.
As well as overpayment of tax arising as a result of contractor deductions, your expenses play a large role in whether or not you can claim CIS tax back.
Getting the figures correct so that you obtain the full CIS refund you are entitled to is not always a straightforward process. Knowing which expenses are eligible to offset against your earnings can be a major complicating factor.
It is highly recommended that you work with a professional CIS tax bookkeeper to make sure your CIS return information is accurate and fully legally compliant. If you claim too few expenses, you will not get the full refund you are due; but if you overinflate your expenses (even accidentally), you could face prosecution and large penalties.
If your main contractor has not provided you with your CIS statements, we can request replacement copies to be sent over so that we can accurately assess your entitlement.
We are sometimes contacted by panicking subcontractors who cannot get hold of their CIS statements because the contractor has gone out of business or hasn't provided them. If you haven't been provided with statements, or a contractor has gone out of business, you can obtain replacement copies from HMRC.
If you miss the deadline, you will be charged an immediate £100 penalty. This penalty only rises over time, and could rise into the £1000s. Don't panic, though. At AMR Bookkeeping, we are experienced in helping clients get penalties scrapped, which is sometimes possible even on historical returns.
We also know the right processes to go through to go back over previous years where you may have overpaid tax and get the figures corrected so you get the CIS refund you are entitled to.
At AMR Bookkeepers, we are highly experienced in all areas of the Construction industry and the intricacies of its unique tax rules. We work with many subcontractors on ensuring they get the full benefit of their CIS status, helping our clients achieve the refunds to which they are entitled and getting their returns submitted in a correct and timely manner.
We will assess your figures and paperwork and liaise with HMRC on your behalf. This alleviates any stress on you, particularly if you find the task of calculating your tax difficult or time-consuming.
Get in touch with one of our friendly, expert advisors for a complimentary chat about your CIS tax returns and claiming the CIS refund you are entitled to.