Every year we get several enquiries about the Construction Industry Scheme (CIS) and, specifically, how a CIS tax rebate works. If you’ve already started working as a subcontractor, it’s likely you’ll be familiar with all things CIS. For those of you who are newbies, or perhaps you just need a quick refresher, consider this your comprehensive guide to all things CIS tax refunds.
What is CIS tax?
The Construction Industry Scheme was introduced by the government to minimise tax fraud within the construction industry and ensure construction workers paid what they owed. Contractors who employ subcontractors are therefore obligated to make tax deductions at the source before paying their subcontractors. These deductions are then directly passed on to HMRC.
If you are a subcontractor who carries out construction work, it’s important to note that you’re still responsible for managing your taxes, despite the fact you’ll have deductions taken off as part of the CIS. This means that you’re in charge of making sure any deductions taken are used to offset the outstanding tax and National Insurance (NI) you owe. In some cases, you may even find you’ve overpaid on your taxes – that’s when you’re due a CIS tax rebate.
Remember, if you’re a contractor in the construction industry, you must register for CIS. If you work as a subcontractor for someone, it’s not a compulsory requirement to be registered under the CIS but it does offer you benefits to do so. Subcontractors registered under the scheme are taxed at 20% while those who are unregistered are taxed at 30%.
What is a CIS self-assessment tax return?
When added together, the total deductions taken from your pay over the year might result in an overpayment. This is because, after expenses have been accounted for, the deductions can sometimes surpass the amount of NI and tax due. A CIS rebate, also known as a CIS tax refund, is therefore HMRC refunding you the tax you’ve already paid through your contractor employer the previous tax year.
Am I due a tax rebate?
Whether or not you’re eligible for a CIS tax rebate depends on a number of factors. In a nutshell, if the amount you’ve paid in CIS deductions is greater than the amount of tax and NI owed, you will be eligible for a CIS rebate. It’s for this reason that it’s paramount you keep accurate records of all your income sources, expenses, and any other payments made. It will make your life much easier when it comes to tax calculations for the previous tax year. Plus, HMRC could ask you to provide evidence so keeping copies to hand is always a good idea.
You can calculate a CIS tax refund while completing your usual self-assessment tax return. Once you’ve reported your total income, allowable expenses and CIS deductions, you will then be able to calculate the total tax amount owed and any refund you are due as a result of overpayment.
Common mistakes when filing a CIS self-assessment tax return
One of the biggest reasons for long delays in the refund process is down to inaccuracies. Making mistakes or miscalculations can lead to HMRC requesting extra evidence and details, or may even result in a rejection of your claim. Getting a CIS tax advisor on board is a great way to make sure you’re submitting all the right information, and that your calculations are correct.
Accountants can also make sure you’ve applied for all the relief you’re eligible for, and that you’re getting the most out of your rebate. One of the most common mistakes construction workers make is not claiming their CIS deductions.
It’s important to remember that CIS rebates won’t be issued until after HMRC has received and processed your self-assessment tax return (SATR) so it’s super important you don’t miss the deadline to file! You’ll be able to track the status of your tax return and pending refunds through your online account.
What CIS Deductions Can I Claim?
An important part of your calculations should include working out which CIS deductions you can and cannot claim. As a subcontractor, you can make a real difference to your taxable income by claiming certain business expenses for things like:
- Travel expenses: if using your vehicle for work purposes, you can opt for a mileage allowance or claim some expenses like fuel or road tax.
- Tools & gear: if you buy equipment necessary for you to carry out your job safely (helmets, hi-vis jackets, etc), these can be claimed for in deductions.
- Utility bills: you might be able to claim for a portion of your internet and phone bill as long as you claim for business use only and not personal.
How to file a CIS self-assessment tax return
If you want to claim tax back, you first need to make sure you fit the following criteria before you start filing for a CIS rebate:
- Be a subcontractor working in the construction industry
- Have paid too much tax under the CIS during the tax year (i.e. total tax deducted is higher than your tax liability)
- Be self-employed or working through a limited company as a subcontractor
- Have worked for at least one contractor during the tax year (from April 6th to April 5th)
The next step is to gather all the relevant documents that will need to be sent in alongside your self-assessment tax return which also includes a specific section for CIS.
What do I need to file my self-assessment tax return?
Before you file for a CIS rebate, you need to make sure you have all the right documents. Missing or inaccurate paperwork can lead to delays.
- Invoices: If you’re a self-employed subcontractor, have your invoices handy. They should show any work completed and payments received
- Payslips/Payment Statements: These will show how much tax has been deducted from your earnings and will be crucial for your calculations
- UTR (Unique Taxpayer Reference): You need a UTR number if you’re registered as self-employed with HMRC
- P60 or P45 (if applicable): These documents are essential if you were employed under CIS for part of the tax year
CIS rebate FAQs
We know that navigating CIS tax can often feel like navigating a minefield, so we’re here to make sure you get all the information you need without any unnecessary jargon or fluffy language. Check out our CIS Rebate FAQs guide above for more in-depth answers.
File your CIS self-assessment tax return with Baa Accounting
At Baa Accounting, we are your CIS rebate specialists! Depending on your personal circumstances and the info you provide us with on your form, our services could cost as little as £299 + VAT. Plus, the process for getting your rebate couldn’t be simpler. Here’s how it works:
1 – easy online form
Fill in our easy-to-use online tax refund form with all the relevant details.
2 – call from us
Someone in our CIS rebate team will call you, answer any questions and make sure you’re getting as much out of your rebate as possible.
3 – say yes and relax
Confirm your rebate amount on the online platform, then step back and let us do the rest! You can expect your repayment in as little as two weeks as long as all your info is correct.
Get in touch
Want to know more about how we can help with your tax rebate? Give us a call today!
