Introduction

If you are a Subcontractor, whatever your trade, you will need to complete a tax return so that you can declare your earnings to HMRC. Some people end up paying more tax than necessary, either because they haven’t recorded evidence of their costs, or they don’t realise what expenses and allowances they can claim. All self-employed people are allowed to claim tax-allowable expenses, so it is important you get into a routine of recording your income and expenses regularly if possible. We have listed below the most common expenses which can save you tax.

 

Any expenses that you have incurred which are wholly and exclusively for your work are tax deductible.

 

CIS Tax repayments

If you are a Sub-Contractor in the CIS, you may be having 20% tax deducted by the Contractor from your gross payment. (30% if you don’t have a UTR) Don’t worry, after your Tax Return is completed and any tax due is calculated, the tax deductions will be credited and, in most cases, this will result in a refund of tax for you.

 

Sole traders and partners

At the end of the tax year, send in your Self-Assessment tax return as usual. You should record:

 

·       the full amounts on your invoices as income

·       any deductions contractors have made in the ‘CIS deductions’ field

·       HM Revenue and Customs (HMRC) will work out your tax and National Insurance bill and take off any deductions made by contractors.

 

If you still owe tax after this, you’ll need to pay it by 31 January following the end of the tax year.

If you’re due a tax refund, HMRC will pay the money back.

 

Limited companies

If you have gross payment status, declare all your income in your Corporation Tax return as usual.

If you pay CIS deductions, you must claim these back through your company’s monthly payroll scheme. Do not try to claim back through your Corporation Tax return - you may get a penalty if you do.

Send your monthly Full Payment Submission (FPS) as usual to HMRC.

Also, send an Employer Payment Summary (EPS). Enter the total CIS deductions for the year to date.

HMRC will take your CIS deductions off what you owe in PAYE tax and National Insurance. Pay the balance by the usual date.

If your company’s PAYE bill for the period is reduced to zero and you still have some CIS deductions you have not been able to claim back, carry this forward to the next month or quarter (in the same tax year). Tell HMRC in the EPS that you have nothing to pay.

If HMRC thinks your claim is wrong

HMRC may ask you to provide evidence for your CIS deductions or to change your claim.

If you do not do this by the deadline they give you, HMRC will correct your claim and you will not be able to make any more claims in that tax year.

You can appeal HMRC’s decision. They’ll tell you how to do this.

 

Keep records

Your company must keep a record of amounts claimed back against your monthly or quarterly PAYE bill.

You can use form CIS132 to do this or keep your own records.

 

If you paid too much in CIS deductions

HMRC will pay back any deductions your company has not been able to claim back from its PAYE bill during the tax year.

 

If your company goes into administration

If your company goes into administration or you liquidate your company, the person managing it should write to HMRC to ask for CIS deductions to be repaid straight away.

 

If you do not have all your CIS statements

If you have not received all the CIS statements you need from your contractor, you can ask them to send you replacement copies.

If the contractor you’re working for stops trading and you have not been able to get all your CIS statements, you should write to HMRC.

 

 

 

 

Conclusion

All CIS deductions can be claimed from HMRC, but the key is to make sure that proper records are kept. This will ensure all of the deductions are claimed in addition to proper support documents are maintained in case a query is sent from HMRC.

This is detailed work and careful administration is required. At Cheylesmore Chartered Accountants Coventry UK, our expert team and high-standard customer service help you and your business stay on top of your tax obligations and avoid any penalties from regulators. Please feel free to contact us for a consultation.