CIS tax return

CIS tax return

What is the Construction Industry Scheme

In the old days, a contractor would hire a subcontractor and pay him cash in hand at the end of the week. HMRC soon realised many of these subcontractors were not declaring this income and paying tax any tax. HMRC therefore introduced rules to make the contractor liable for deducting tax before making a payment to his subcontractors. This way, the taxman collects his tax up front, and the subcontractor can claim overpaid tax at the end of the year.

We charge a flat fee of £149. No commission. No surprises

What is the process

You must make a claim with HMRC by submitting a self assessment CIS tax return. The correct process is to:

  • Prepare accounts (these are compiled using your payslips, P60 and receipts/invoices and bank statements)
  • Complete a self assessment tax return (this tells HMRC what your taxable income is and how much tax refund you are due)

You don't need to send HMRC copies of your but you must keep them on file to support the numbers in your tax return (for example, if you have purchased tools, you need to keep the reciepts to prove you purchased these. Furthermore, although uncommon, HMRC might visit you to see the tools)

What are allowable expenses

Expenses you incur "wholly and exclusively for the purposes of your trade". Typical expenses include tools, materials, safety equipment, payments to subcontractors and overnight temporary accommodation.

What about travelling costs

Commuting to an "ordinary workplace" is not considered a relevant expense. The rules for travel to a "temporary workplace", however are different. The definitions for a temporary workplace are not exactly clear. This is be a subjective area and as always, it will depend on your personal circumstances.

How much CIS tax refund can I claim

It depends on your CIS tax deduction rate. This is best explained with a worked example. This assumes a sole trader with a 20% CIS deduction.

Why am I treated unfairly

HMRC implemented this system to combat abuse in the construction industry. You can apply for gross payment status by completing these forms

CIS worked example

Income in the year 30,000
Purchase of tools, safety equipment (5,000)
Taxable income 25,000
Tax and ni due 4,054
CIS tax already deducted (6,000)
CIS tax refund due £1,946

I've lost some of my receipts - can I still make a claim for these costs

In short - NO. HMRC may ask to see proof of expenses recorded in your tax return and failure to provide support will result in HMRC not allowing the expense. If this happens, HMRC could charge interest and seek to charge penalties. Penalties can be anything up to 100% of the tax overclaimed.

How long does a CIS refund take

It can take up to 8 weeks (although it is usually much quicker). This depends on a number of factors outside of our control and mainly hinges on how long HMRC will take to process the repayment and the level of checking they do before releasing the funds.

How can we help you

  • We take the stress away by doing everything for you and dealing with HMRC on your behalf. All you need to do is send us the information, we do all the work, you review and sign the tax computation and return on your phone and wait for the repayment to hit your bank account.
  • In terms of sending us information, you can send us everything by post, take pictures on your phone or send us an email(s). Simple.

£149 feels expensive

This cost covers our time dealing with your paperwork, uploading to our tax software, submitting the return to HMRC and use of our client portal. We are also available on the phone to answer questions.