If you’re a contractor working in the construction industry, chances are you’ve already heard of CIS. For the newbies amongst us, or anyone needing a quick refresher, this guide runs you through what a CIS self-assessment tax return is, who needs to file one, and what’s involved in the process.
A brief overview of CIS tax
The Construction Industry Scheme, also known as CIS, is a tax system used by HMRC to manage the tax payments of contractors and subcontractors in the construction industry. Under CIS, contractors are required to deduct tax from their subcontractors’ payments – this sum is then sent directly to HMRC.
As a contractor working in the construction industry, it’s a legal requirement to register under the Construction Industry Scheme if you pay and employ subcontractors to carry out work.
For subcontractors, it’s your choice whether or not you register for CIS. The amount of tax you pay is dependent on your status:
- CIS registered = taxed at 20%
- Not registered = taxed at 30%
The scheme is meant to ensure that subcontractors pay the correct amount of tax throughout the year.
What Is a CIS Self-Assessment Tax Return?
The CIS self-assessment tax return is completed annually and refers to the process where contractors and subcontractors declare their income to HMRC. It’ll include the following info:
- Income: The amount of money you’ve earned through your work as a contractor or subcontractor.
- CIS Deductions: The amount of tax that has already been deducted from your payments under the CIS by contractors.
- Expenses: Any allowable expenses you’ve incurred in running your business. This might include costs like materials, tools, travel, and other business-related expenses.
- Other Taxable Income: Any other income you’ve received. This includes things like rental income or dividends, if that applies to you.
For subcontractors whose tax has been deducted at the source by their contractor, it’s important to remember that it’s your responsibility to file your tax return and pay any additional tax that may be due.
Equally, you might find you’ve actually ended up paying too much tax at the end of the year. When added together, the total deductions taken from your pay over the year might 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.
For more info about CIS rebates and claiming tax back, check out our recent blog here.
Who Needs to File a CIS Self-Assessment Tax Return?
All subcontractors working under the CIS are required to file a SATR at the end of the tax year, which runs from April 6th to April 5th.
Unsure whether this applies to you? If you fit one of the below categories, you’ll probably need to file:
- Self-Employed Subcontractors: If you are a self-employed subcontractor that has had CIS deductions made from your payments, you’ll need to file a self-assessment tax return.
- Limited Companies: If you operate as a limited company in the construction industry, you’ll need to submit a return for the company’s income and deductions.
- Contractors: If you’re a contractor, you may also need to file a tax return if you are making subcontractor payments under the CIS.
Even if your CIS deductions cover your liability and you haven’t got any outstanding tax to pay, you still need to file a tax return to ensure that HMRC has a complete record for you.
How to File a CIS Self-Assessment Tax Return
Filing your CIS tax return is simple, but it’s important you check back over your calculations and paperwork to make sure you haven’t made any mistakes. Inaccuracies could hinder the entire process and sometimes even lead to penalties.
Here’s what you need to do:
- Register for self-assessment: all self-employed workers must register with HMRC for self-assessment. If you haven’t already done so, this is step number one!
- Gather your documents: make sure you have all relevant information to hand (see above for more details).
- Complete your tax return: file your self-assessment tax return using HMRC’s online portal. If it becomes apparent that you have overpaid your tax, you can proceed to fill out a CIS rebate form.
- Fill out your CIS rebate form: as well as your personal details, you’ll need to attach proof of income and CIS deductions made.
- Submit your tax return: the deadline for submitting your annual SATR online is 31st January following the end of the tax year.
Once you have filed your self-assessment tax return and submitted your CIS rebate claim, all you have to do is sit back and wait for HMRC to process it!
Common Mishaps with CIS Self-Assessment Returns
Here’s a list of what to avoid when it comes to filing for your rebate:
Missing paperwork: it’s crucial you have everything in order before you start filing and making your claim. Staying organised and on top of your paperwork throughout the year is the best way to ensure the process goes smoothly.
Filing late: late submissions can result in fines and interest. Filing your tax return on time is the best way to avoid any late penalties. Starting the process early also means you have enough time to get your documents in order, or to contact your contractor for replacement documents of anything misplaced.
Incorrect calculations: make sure you triple check your calculations so that you claim for the right amount of tax back. A mistake in this area could cause HMRC to request additional evidence or information from you, ultimately delaying the whole rebate process.
Conclusion
A CIS Self-Assessment Tax Return is super important as it helps maintain the tax system and ensure that the right amount of tax is paid by individuals working under the CIS.
If you’re unsure about any part of the process or your responsibilities, it’s always a good idea to consult with a tax professional to ensure everything is handled correctly.
Baa, your CIS rebate specialists
With 15+ years of experience in the CIS sector under our belt, we like to think we know a thing or two about filing CIS self-assessment tax returns. Get in touch with our team and start your rebate claim today.
