If you engage contractors who are on the Construction Industry Scheme (CIS), they’ll be anxious to avoid paying more tax than they should, and claiming expenses is an important part of that. In this article we’ll explain how CIS expenses work, and the common things your contractors can claim, so you can advise them correctly.
CIS Tax Returns
Your CIS contractors are self-employed, so they’ll need to register as self-employed with HMRC and complete a self-assessment tax return when the tax year ends. Under the CIS, money is deducted from the contractor’s payments and paid to HMRC as an advance payment against their tax. Most CIS contractors overpay during the tax year, so their tax return is likely to result in a refund rather than a tax bill.
As part of the process, any allowable expenses are offset against the contractor’s earnings, effectively reducing their taxable income and resulting in a lower tax bill, which in most cases translates as a higher refund.
What Expenses Can CIS Contractors Claim?
It wouldn’t be possible to cover absolutely everything in this article, and this is not an exhaustive list, but we’ve covered the most common things that most CIS contractors can claim.
Tools and equipment
Your contractors can claim for any tools or equipment required to complete their work, and any materials they use on site, as well as any costs associated with maintaining their equipment.
Travel expenses
If your contractors use a vehicle for work, there are two options: They can claim a portion of the cost of running it, including fuel, road tax, maintenance and repairs, the MOT and parking costs (but not parking fines) or they can claim the mileage rate for all their business miles. For a car or van, the mileage rate is £0.45/mile for the first 10,000 miles in each tax year and £0.25 thereafter.
Subsistence
Where your contractors travel to a client’s site to work, they can also claim for food and drink while on site, and while on the way to and from work.
NOTE: Travel and Subsistence claims are reliant on the contractor attending a temporary workplace. This means they cannot be claimed if the contractor works, or expects to work, at the same location for more than 24 months, as the workplace will no longer be classed as temporary. |
Home office costs
If your contractors do some work from home, for example generating invoices or quotes and looking for work, they can claim part of their home bills as an expense. They can either work out the proportion of the cost, based on how much of their home is used for business and for how long, or they can claim the “simplified expenses rate”, which amounts to £10 a month if they work from home for 25 hours or more.
Depending on how they run their business, they may also be able to claim for part of their internet and phone costs, printer ink, stamps, stationary and any other costs associated with running their office.
If you have any questions or if we can help in any way please call our expert team on 01296 468 483 or email info@orangegenie.com.