Who should be paying CIS tax? And why might you be due a refund?
Are you surrounded by fellow workers on a construction site, excitedly talking about doing their tax returns in the next couple of weeks? This is probably because they are taxed under a scheme called CIS and they are expecting a tax refund. What is CIS tax? Who should be paying it? And why might you be due a refund?
CIS = Construction Industry Scheme
The CIS is a tax scheme where contractors deduct money from a subcontractor’s payments and pass it straight to HMRC. These deductions act as advance payments towards the subcontractor’s tax and National Insurance. Contractors must register for the scheme, subcontractors don’t. However, if subcontractors don’t register the deductions will be taken at a higher rate.
Subcontractors must complete a tax return every year and submit it to HMRC.
Am I a subcontractor?
A subcontractor is anyone who does construction work for a contractor. HMRC define a contractor as:
Anyone who pays subcontractors for construction work
Any business that spends an average of over £1m a year on construction in any 3-year period
Construction work covers most construction work to
A permanent or temporary building or structure
Civil engineering work like roads and bridges
For the purposes of CIS, construction work includes:
Preparing the site - for example, laying foundations and providing access works
Demolition and dismantling
Building work
Alterations, repairs and decorating
Installing systems for heating, lighting, power, water and ventilation
Cleaning the inside of buildings after construction work
If you work in construction and are self-employed you are probably a sub-contractor and should register for CIS.
What do I have to do as a subcontractor?
Subcontractors must complete a self-assessment tax return each year before 31 January. Most will look to complete the return as soon as the tax year ends on 5 April rather than wait until the following January because many will be due a tax refund.
In most cases where tax has been deducted through the course of the year, too much tax will have been paid as no account has been made for allowable expenses or your personal allowance, which for 21/22 tax year was £12,500.
How to claim your refund
To make sure you receive your refund as soon as possible here is what you need to do:
Call the team on 01296 485185 and let us know you need help
Send us the following
o your record of invoices, whether are produced by your or self-billed by your contractor
o all CIS statements and receipts for the period 6 April 2021 to 5 April 2022
o Receipts for things you use for work including tools, equipment, plant hire etc
o Receipts for materials too, we may be able to offset some
o Bank statements – if any records for income or expenditure have been lost, bank statements can prove vital in filling in the gaps
We will also need details of any other income in the period. So if you have also been employed we will need your P60 as soon as you have it and details of any investment income from rental properties or other sources
We can start to work on your refund as soon as the tax year has ended. Better still you won’t need to settle our fee until you receive your refund. If you agree we can arrange for the refund to be paid into our client account and for your agreed fee to be deducted from your refund.
Working through a Limited Company?
If you are a subcontractor working through a Limited company that’s not a problem. We can assist you with your accounts preparation and corporation tax returns making sure your CIS tax is off set efficiently.
Introduce a friend and receive a reward
We know subcontractors work together a lot, so we know you can help us as much as we can help you. Introduce a friend or colleague to Orange Genie Accoutnancy, who then becomes a paying client and we will send you a reward. (T&c’s apply)
Why not give one of our accountants a call on 01296 468185. They will be happy to offer you a free consultation to see how we can help you and your business.
Why Orange Genie Accountancy?
Orange Genie Accountancy offers fixed fee accountancy packages to contractors and freelancers. Each client has unlimited access to their own dedicated approachable and friendly accountant. All Orange Genie Accountancy accountants are specialists in the contracting market, so they can give you bespoke, high quality advice.
We will always keep you informed about anything that could affect you and your company. Our relationships with our clients are extremely important to us so we'll be in touch often, whether it be face to face, over the telephone or email.
Our packages start at £75 + VAT a month for an online service. Our most popular package is £120 + VAT a month which provides you with your very own dedicated accountant as well as:
Unlimited accountancy support
Face to face meetings so we can get to know you and understand your contracting goals
Proactive contact
Director and employee payroll
Annual Return
Self-Assessment Return
A fully compliant service so you are safe in the knowledge that you are meeting your legal obligations
And much more, includingaccess to wealth management advice, IR35 reviews and pensions planning.
If you would like to appoint Orange Genie Accountancy as your accountants please either fill out our enquiry form or give one of our friendly expert accountants a call on 01296 468 185 or email accountancy@orangegenie.com.