As a contractor or subcontractor working in the construction industry, understanding what deductions you can and cannot claim is super important if you want to manage your finances effectively.
In this blog, we’ll run you through the CIS deductions you’re able to claim for and how you can take full advantage of them.
What is the CIS tax?
For those who are new to the construction industry, here’s a quick rundown of all things CIS and CIS tax.
CIS stands for the Construction Industry Scheme. It was created as a way to regulate tax payments of construction workers and ensure all workers paid tax on their earnings. As such, subcontractors registered under CIS are taxed at 20% by the contractor they carry out work for. This is then passed directly onto HMRC.
For a more detailed breakdown of CIS and how to claim tax back for overpayment of CIS deductions, head over to our Knowledge Hub for guidance.
Claiming CIS Deductions
When it comes to filing your CIS self-assessment tax return, you’ll notice a section dedicated to claiming expenses. A common mistake from those new to construction can be to skip over this section entirely, but that would be a big mistake! There’s a whole host of CIS deductions you could be claiming for that can make a real difference to your tax liability.
We’ve listed a few examples below.
Materials & Supplies
This is one of the most common expenses you can claim for. When you purchase materials for a job, you’re able to deduct these costs from your taxable income. This includes claiming for:
- Materials – plaster, cement, nails, adhesives, etc
- Equipment & tools – practical pieces you need to carry out your work such as hammers or clamps
- Safety equipment – hardhats, goggles, high vis jackets, etc
It’s important to note that it’s unlikely you’ll be able to claim for more expensive tools or machinery that you’re planning on using over a period of several years.
Travel & Mileage Costs
As a subcontractor, it’s often the case that you’ll have more than one job on the go at one time, and that means having to travel to several different sites. After a while, you might find that the cost of fuel is starting to add up. Fortunately, you might be eligible to claim for travel and mileage to help cover some of the cost.
- Travel expenses to and from construction sites
- If your vehicle is used for work purposes, you can claim mileage. For this you’d need to keep a detailed log of journeys, distance travelled, purpose of the trip, and vehicle used
- Parking fees & tolls directly related to construction work
Be careful to only claim for travel done for work purposes, and not personal errands.
Professional Fees
This may not be the first CIS deduction that springs to mind but it definitely shouldn’t be overlooked. In certain situations, subcontractors will need to pay for professional advice or services, both of which are viewed as deductible expenses under CIS. That could include fees:
- Membership fees for professional associations related to construction work
- Legal fees for any contracts or disputes related to your business
- Accountancy fees for handling bookkeeping, payroll, taxes, etc
As always, keeping detailed records of payments made is the best way to be able to claim accurately when the time comes.
Office Expenses
Even though a large portion of a contractor’s work life is dedicated to being on-site, there might be times when you’re required to do more admin-heavy tasks, be that working from home or renting a dedicated office space. As long as there’s a clear separation between personal and professional, you should be able to claim for the following expenses:
- Utility bills – electricity, gas, water, etc
- Broadband – internet and phone bills
- Software – any software or subscriptions directly linked to your business, e.g. accounting software
Where you use something for both business and personal reasons – for example, if you haven’t got a separate work phone so you use one phone for personal and business calls – make sure to only claim for the portion used for work-related activities. This can sometimes feel like a time-consuming and tedious task, however, it’s important you take the time to accurately separate mixed-use items to avoid enquiries from HMRC.
Insurance
When it comes to having insurance as a subcontractor, it can be hard to find the right fit for you. While for some it may be optional, for many subcontractors it’s actually a requirement, depending on the type of work you carry out. Certain types of insurance can be pretty costly, so claiming the cost of insurance premiums under CIS is a good idea.
- Public liability insurance – protects against claims made by the public for injuries, fatalities, property damage, etc
- Employers’ liability insurance – protects businesses against financial burdens that come from employee claims for illnesses or injuries caused by work
- Professional indemnity insurance – protects against claims made by clients for alleged negligence, errors, inadequate services, etc
As with all expenses, personal insurance that isn’t connected to your work as a subcontractor cannot be claimed for.
CIS Deductions
The expenses we’ve mentioned in this blog that you can claim for are only a few examples of things you may be eligible for, but the list goes on. You might find it useful to do your own research to supplement our blog, as rules are always changing and you may find you’re now able to claim for something you previously weren’t able to.
If there’s one thing you take away from this blog, it should be that in order to claim for allowable expenses, it’s paramount you have the receipts, invoices, and evidence to back up your claims. If you haven’t already, start keeping detailed and accurate records of your transactions ready to use as proof of purchase when the time comes. Trust us when we say it’ll make filing your CIS self-assessment tax return a whole lot easier!
Get in touch
If you’re not sure how to maximise your allowable CIS deductions, get in touch with our team today and they can assist you with your CIS tax return and claiming expenses.
Let us help you tackle your finances so you can focus on doing your work!
