If you are working in the construction industry in the UK, you will need to be aware of the Construction Industry Scheme - also known as CIS.
CIS was developed to minimize tax evasion within the construction industry and applies to all contactors and subconstractors who work in main stream construction within the UK.
Therefore, all construction workers - be they contractors or subcontractors should register with the Construction Industry Scheme before carrying out any work.
The Construction Industry Scheme Applies to:
- Self employed
- Owner of limited company
- A partner or in a partnership or trust
When you should register as a contractor
- You should register as a contractor if:
- You pay subcontractors to carry out construction work
- Your business spends more than £1 million + per year on construction on average over a three year period.
When to register as a subcontractor
You should register as a subcontractor if you do construction work for a contractor.
What does the Construction Industry Scheme Cover?
• Groundwork-laying foundations and providing access works
• Brick laying, roofing & other building tasks.
• Demolition, extensions, repairs and alterations.
• Installing heating, lighting, power, water, as well as ventilation
• Cleaning buildings after construction work
The average CIS rebate is £1453
How does CIS work?
According to the Construction Industry Scheme a contractor must deduct 20% of your pay and it must be submitted to HMRC. The deductions then count towards your NI and tax bill. However, if you don’t register for the scheme contractors have to deduct 30% from your pay – so it is in your interest as a contractor or subcontractor to register for CIS.
Once you are registered your contractor should give you a CIS voucher or CIS certificate to confirm the deductions made and submit a CIS return to HM Revenue & Customs at the end of every month.
Deductions aren’t made on any payments when the subcontractor is eligible for gross payments.
What is Gross Payment status ?
You will only qualify to receive gross payment status if all of the three below points apply to you and your circumstances:
- Construction work is carried out in the UK and run largely though a UK bank account
- Your annual turnover is £30,000 or more
- You have no outstanding tax returns or payments due
Self employed contractors are required to submit a tax return at the end of each financial year (5th April) and before the 31st October. HM Revenue & Customs will then calculate if you are due to pay any tax or National Insurance and offset any CIS deductions.
What can CIS Workers Deduct?
As a CIS Worker there are a number of items that are tax deductible including:
• Materials, tools and equipment and the cost of maintaining these
• Travel expenses including mileage allowance, tolls, parking, insurance, petrol, MOT, vehicle repair etc.
• Internet, phone and stationary
• Protective clothing including boots, hard hat, gloves etc.
• Administration expenses including book keeping
• Home Office Expenses – e.g. running costs, equipment
• Advertising your services
Filing your tax return
As we mentioned previously, if you’re a self employed construction worker in the UK, then you’ll need to file your tax return before the 31st October. Failing to meet the deadline will result in fines from HMRC within the CIS scheme. Therefore it’s really important to keep your documents and paperwork in order as well as making any payments required on time.
Taxback.co.uk are available to assist both PAYE and self employed construction industry workers to claim back tax due to them. Did you know the average tax refund for CIS workers is £1453?
What you’ll need to make a CIS Tax Claim:
• It’s important to keep all receipts and records of any expenses
• Keep any evidence (e.g. CIS vouchers) of any CIS deductions made to your pay.
• You should file after the end of the tax year on 5th April and before the 31st October, otherwise you may get a late filing penalty charge.
• You can use Taxback.co.uk’s online tax calculator to find out what you could be owed!
• Taxback.co.uk are able to assist you with filing your tax return by the deadlines and make sure that your return is all in check.
Keeping Your Books in Order
Book Keeping is essential to ensure you can legally claim the correct amount of tax you are owed when applying for a CIS Tax Refund.
Of course everyone has their own individual ways of doing things, but there have never been more easy ways of keeping your books in order.
Signing up to online software such as xero.com or KashFlow allows you to upload your receipts, take and make payments and much more. Accounting software such as this allows you to keep a watch on your cash flow as well as keeping all your expenditure in one place.
Although there are fantastic software methods for tracking your receipts, you could be inclined to pay a bookkeeper. This may be a more suitable option if you have a larger company.
Self employed contractors may and sub contractors may find it helpful to use a spreadsheet to keep their figures in so they can easily tot up their earnings and expenditure.
Either way, keeping all your wage slips and receipts is essential practice for those who may want to claim a CIS Tax Refund.
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Construction Industry Scheme (CIS) Breakdown
Whether operating as a sole trader, partnerships or companies, a business within the mainstream construction sector must comply with the Construction Industry Scheme – also known as CIS. Apply for a CIS Tax Refund
Have you filed your self assessment tax return?
The tax deadline for Self Assessment tax returns is the 31st of January. Failure to file your return for the previous tax year could result in a fine from HMRC. Avoid any late penalties by filing your self assessment tax return and paying what you owe before the deadline date. Start your self assessment tax return online and our agents will file your return and contact you with any questions.