In this blog, we delve into the Construction Industry Scheme (CIS) and how it affects the way that construction workers pay their taxes. If you’re wondering what a CIS tax rebate is, who it applies to, and whether you’re due one, you’ll find all your answers below!
What is a CIS tax rebate?
If you’re a contractor who works in the construction industry, it’s likely you’ve already come across CIS. Why? It’s a pretty important initiative that was introduced by the government in 1971 to tackle tax avoidance and make sure contractors paid what they owed.
It means that when you carry out construction work for a contractor employer as a subcontractor, your contractor will deduct taxes from your wages before you get paid. This is to cover your tax liability and is passed directly to HMRC. Subcontractors registered under the scheme get taxed at 20%. More often than not, at the end of the tax year, it becomes evident subcontractors have overpaid in their taxes and are due a refund.
This is where the HMRC tax rebates come in – it’s the government’s way of paying you back the tax you’ve already paid through your contractor employer.
In what situations am I due a tax rebate?
The number one rule is that you have to be a subcontractor registered under the Construction Industry Scheme to even be in the running for CIS rebate. Your contractor will need to verify your tax status and registration with HMRC before you undertake any work. It’s important this is all sorted ahead of time as it can cause a real mess with deductions and calculations later on.
Remember, being a subcontractor isn’t the same as being classed as a contractor – the two pay different amounts of tax and National Insurance (NI). The CIS scheme defines a subcontractor as an organisation or business that is contracted to carry out construction work on behalf of a contractor. You can find more info on this process and register here.
In most cases, subcontractors can use the following telltale signs to work out if they’re due a refund:
- You’ve carried out work for one or more contractors over a prolonged period of time
- You’ve been making monthly tax payments and NI contributions
- Your tax liability is lower than the total amount of tax you’ve paid after deductions
- You’ve completed your self-assessment tax return (SATR) and the numbers aren’t adding up
Claiming a CIS tax rebate isn’t as tricky as some people think, and it’s well worth the effort if it means you’ll get back some of your hard-earned cash.
An important thing to note is that HMRC will investigate your tax history when you make a claim and if you’re found to have any outstanding tax or a history of non-compliance, they may withhold your owed tax while they look into the situation. In some cases, they will even deduct the tax owed from previous years from your current rebate claim. It’s always best to practice compliance and maintain accurate records to prevent this from happening. That way, you reduce the risk of delays in rebate payments.
Am I due a tax rebate?
The easiest way to know for sure is to review all of your tax documents and payslips and see if the numbers add up. Most subcontractors will find out they’ve overpaid on CIS deductions whilst doing their self-assessment tax return, as that’s the easiest place to identify discrepancies once things like allowable expenses and tax relief have been included in calculations.
If the amount deducted by your contractors is higher than your tax liability for the year (considering allowable expenses), you’re due a refund.
You might find it useful to use an online CIS rebate calculator to help you work out how much you’re owed. In the majority of cases though, we’d recommend using an accountant to help. That’s because you’ll minimise your risk of inaccuracies or errors in doing so.
I’m due a tax rebate, how do I claim?
Okay so you’ve confirmed you are indeed due a rebate – that’s good news! But what’re your next steps? Well…
- Fill out a CIS refund form – this is done as part of your self-assessment tax return. The form you need to claim your refund can be found on HMRC’s online platform. You’ll need the usual personal details (UTR number, name and address, PAYE reference numbers, etc).
- Locate relevant paperwork and a calculator – it’s your responsibility to work out how much you’re owed back, HMRC doesn’t do the calculations for you. Having organised records will go a long way for this step.
- Provide supporting documents – along with your refund form, you’ll need to submit CIS statements, invoices, receipts, payroll records, proof of identity, and any PAYE P60 or P45 documents if applicable.
- Wait for your rebate to be processed – make sure you keep track of your claim and check in to see its progress every so often. You don’t want to miss a notification from HMRC asking for additional info or paperwork.
Receive your rebate and start planning how to spend it!
Need help with your tax rebate?
Consider Baa your very own CIS rebate calculator with one exception – we’re better! Unlike an online calculator, we don’t make mistakes, we spot them. Our team of qualified accountants are tax experts who’ve completed countless rebates for people like you over the years. If you need a HMRC tax rebate for CIS, you’re in the right place! Order a CIS postal pack or submit your CIS rebate claim online today. Alternatively, contact Baa Accountancy today to kickstart your CIS claim and get one step closer to your money.
