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CIS Tax
Return

Specialist accountants for CIS subcontractors

DNS Associates provide accounting services exclusively for Construction Industry Scheme (CIS) subcontractors.

If you are a CIS subcontractor, DNS Accountants is definitely the best choice for you:

  • DNS supports accounting for the Construction Industry Scheme (CIS)
  • Can advise you on whether you fall into the subcontractor or employee status (or both)
  • Will verify you with Her Majesty’s Revenue & Customs (HMRC) on behalf of your contractor (if needed)
  • Shall keep your records in good order

What is CIS?

CIS is a series of regulations for contractors and sub-contractors working within the UK construction industry. It is a quirky tax that is specific to workers within the construction industry. The Construction Industry Scheme (CIS) sets out how contractors in the construction industry must handle payments to subcontractors for construction work.

Contractors deduct money from subcontractor payments and remit it to HM Revenue and Customs under the Construction Industry Scheme (CIS) (HMRC). These deductions are considered advance payments towards the subcontractor's tax and National insurance.

It is mandatory for contractors to register for the scheme. Subcontractors are not required to register, but their payments are deducted at a higher percentage if they are not registered.

If and when you are verified as self-employed, the payments by the contractor will be dealt with through varying types of deductions.

What records do you need to keep to Claim a CIS Tax Refund?

It is vital for you to keep proof of all your expenses and all amounts to be claimed back against your quarterly PAYE or monthly bill.

These include the following:

  1. CIS earnings records, such as pay statements, indicating income and tax paid
  2. PAYE P60 or P45 certificates - If you've been employed.
  3. Details of any property or investment income.
  4. Claimed Jobseekers allowance.
  5. Receipts or records indicating the amount of any expenses incurred.

You can keep your own records or use the form CIS132 found in GOV.UK. Make sure you keep a copy of your bank statement or download the electronic bank statement if you use an online banking account.

How can you claim your CIS tax refund?

If you work under the construction industry scheme, you will be required to file a Self Assessment tax return, including a reconciling your refund. It must outline the total amounts on the invoices as income and, in the ‘CIS deductions’ field, any deductions a contractor has made should be indicated.

To understand how and when refunds resulting from a tax return are paid, kindly contact DNS Accountants.

What can you claim on your CIS tax return?

It doesn’t take a lot of paperwork to claim a CIS tax rebate. All we need are:

A record of your work expenses, including things like the sites you’ve worked at, the miles you’ve traveled and any tools or equipment you’ve needed to buy. If you don’t have every last detail to hand, no problem. We can almost certainly help you fill in the gaps. It includes -

  1. Business travel expenses include the cost of public transportation, as well as the cost of your motorcycle, van, or car.
  2. Equipment and tools – as well as any protective clothing
  3. Accommodation and subsistence – particularly if you are required to stay away from home
  4. Home usage, including Mobile phone bills
  5. Fees for professional services – such as insurance, an accountant's fee, and bank charges.

CIS statements. These monthly statements from your contractors will show how much you earned and what tax was taken out. You might know them as wage slips or vouchers.

It's a good idea to keep track of your receipts for everything you purchase, as well as the locations and dates of your travels.

Contractor pays subcontractor

When a contractor pays a subcontractor, the contractor withholds 20% of any subcontractor labour costs (Net). The contractor is required to pay this withheld balance over to HMRC monthly.

The subcontractor can reclaim the 20% withheld by the contractor from HMRC at the end of the tax year. In practice, the reclaimed amount is knocked off any tax owed by the subcontractor to HMRC.

The scheme is effectively a way for HMRC to use contractors to tax subcontractors upfront.

Getting paid and paying tax

Under the Construction Industry Scheme (CIS) rules, contractors can make gross payments or payments under the deduction to subcontractors for construction work.

If you want contractors to make gross payments, you need to register with HM Revenue & Customs (HMRC).

Guide to getting paid under CIS

Verification

Under the Construction Industry Scheme (CIS), contractors have to “verify” the subcontractors who work for them. This means checking your payment status with HMRC so they can pay you the right amount.

When you get a contract to do work covered by CIS, you will need to register with the scheme as soon as possible if you are not already registered. The information HMRC needs from you to register depends on your employment status and generally includes your name, business name, business address, and other details about your business.

Getting paid: gross or deduction

Under the Construction Industry Scheme (CIS), there are two ways of paying subcontractors – gross or under deduction.

Gross payment - If you are registered for gross payment under CIS, the contractor pays you in full without any deduction. So you will need to pay tax and National Insurance contributions (NICs) on this amount later through your CIS tax return.

Under Deduction - If you are registered for under deduction under CIS, the contractor deducts 20% of the amount before paying you and pay this over to HM Revenue & Customs (HMRC).

Gross payments under CIS

In order to ask HMRC to register you for gross payment, your business must:

  • Do construction work in the UK and be mainly run through a bank account.
  • Have a construction turnover, excluding VAT and the cost of materials, of at least £30,000 each year (more for partnerships and most companies)
  • Have complied with all its tax obligations

Before HMRC can grant you gross payment status so you can get paid with no deductions, you will need to show them that your business passes three tests:

  • It carries out construction work – or provides labour for construction work – in the UK.
  • It is usually run through a UK bank account.
  • It meets the turnover test: HMRC will look at your business turnover from construction work for the 12 months before you apply for gross payment status.

Ignoring VAT and the cost of materials, your construction turnover must be at least:

  • £30,000 if you’re a sole-trader
  • £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership
  • 30,000 for each director of a company, or at least £100,000 for the whole company

If five people or fewer control your company, you must have an annual construction turnover of at least £30,000 for each of these individuals.

Compliance test

You and any directors or partners in the business or beneficial shareholders (where five or fewer persons control the company) must have submitted all tax returns and paid all tax due on time in the 12 months before your application. If HMRC has asked for any information about your tax affairs in that period, you will need to have given it to them.

You are allowed a few lapses or late payments in the 12 months. Check the HMRC website for more details.

  • Three late submissions of the Construction Industry Scheme (CIS) contractor monthly return, including “nil returns" – up to 28 days late.
  • Three late payments of CIS/PAYE (Pay as you earn) deductions – up to 14 days late
  • One late payment of Self Assessment tax – up to 28 days late
  • Any delay in filing employer’s end of year return made late.
  • Any late payment of Corporation Tax – up to 28 days, including where any shortfall in the payment has incurred an interest charge but no penalty
  • Any Self Assessment return made late.
  • Any payment not made by the due date, where it is less than £100

If HMRC agrees that you can be paid gross, you must declare your payments in your tax return at the end of the tax year.

CIS payments under deduction

If you do not qualify for gross payments, your contractor will make a deduction on account of your tax and NIC's before they pay you. The standard deduction rate of 20 per cent applies if you have registered for CIS and your details have been verified successfully by the contractor.

If you have not registered for the Construction Industry Scheme (CIS) or the contractor could not verify you, they will have to make deductions at the higher rate of 30 per cent. You can claim credit for these deductions through your annual tax return.

At the end of the financial year, you will need to complete a tax return. HMRC will work out your tax and NIC's bill and set any deductions you have made against it. This will show whether you are due a refund or you need to make further payments.

Nominating someone else to receive payment

If you choose someone else to receive payments on your behalf – like a team member, workmate, relative or involvement of debt factor – they should also register with HMRC. This person is called your “nominee”.

If you are registered to be paid gross, the contractor will pay your nominee gross as long as the nominee is registered for gross. But if they are not, they will be paid under deduction – even if you are registered to be paid gross.

Payments under cis if a subcontractor dies

If a subcontractor dies, their representatives will receive any outstanding payments due.

If the subcontractor were registered to be grossly paid, their representatives would be paid grossly as well. If a liquidator, receiver or administrator is dealing with the subcontractor’s company affairs, any outstanding payments will be made according to the company’s tax status.

DNS-Accountants
FAQs

Frequently Asked Questions

DNS supports PDF invoices for the Construction industry scheme (CIS). We show Net, VAT, CIS amount, and total due amount after CIS on our invoices. The system builds up the balance owed to HMRC if you are a contractor and the balance due from HMRC if you are a subcontractor.

  • Limited Company Formation Services
  • Minimising Tax Payouts
  • CIS Advice
  • CIS tax return service
  • Tax Returns for Limited Companies
  • PAYE and VAT services
  • Bookkeeping Services
  • Business & financial advice
  • Expenses

Yes, you will pay tax "at source", most likely at a rate of 20% of your income. This does not, however, imply that you are "employed." You are still considered self-employed under CIS – even if it feels otherwise. The significant distinction is that you will still be required to complete Self Assessment each year. Failure to file the tax returns on a yearly basis results in three extremely serious consequences:

  1. You're not getting your tax-free Personal Allowance.
  2. You are not receiving any tax relief for work expenses to whom you are eligible.
  3. HMRC can pursue you for non-filing!

If you are receiving CIS statements and are unsure why contact DNS Accountants immediately. We can help you understand the system, ensure you are not paying excessive tax, and keep you out of problems with HMRC.

Many self-employed individuals who work under CIS come to us for Self-Assessment tax returns since our sector experience enables us to maximise your rebate. Our specialised understanding enables us to handle the more complicated and unusual rules that apply to CIS returns that a more general accountant may be unaware of.

If you've been outsourcing any of your CIS work, you'll want to keep accurate records to show the taxman. HMRC, for example, will expect to see specific evidence of the wages you've paid out. Additionally, they'll want to see the specifics of the individuals carrying out the work for you. All taxpayers will be required to provide their names, addresses, and their Unique Taxpayer Reference numbers. Again, DNS Accountants will take care of all these tricky things, ensuring that you remain compliant and out of trouble.

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DNS House, 382 Kenton Road,
Harrow, Middlesex, HA3 8DP

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