Are you a subcontractor in the construction industry?
Do you understand the tax rules and why you have tax deducted from your pay? Do you understand how you can reclaim some or all of the tax?
These Q&As will help guide you through the world of CIS deductions.
1. What is CIS?
Basically the government was worried about construction industry workers not paying their taxes. Their answer was to require any payments to anyone other than a company or someone in employment to have deducted before the monies are paid.
You are paid for the work you do less tax. There is a very good chance that you will be able to reclaim a large percentage of this tax.
2. What percentage is deducted?
There are three rates which could be used:
30% if you are not registered with the tax man as a subbie.
20% if you are registered.
0% if you are an established subbie and meet certain requirements.
3.Why are there usually refunds?
The 20% or 30% deductions are made to all payments which you receive. Even those which cover materials you may have bought for your work. Every person is entitled to a personal tax allowance. Let’s say this is £10,000 ( 2014/15). In this case you are likely to have overpaid by £3,000 ( 30% tax deducted ) or £2000 if 20%.
If you spend £1000 on materials,clothing and other allowable expenses then there will be another £200 to £300 due back.
4.How do i claim my tax refund?
The easiest way is to complete your tax return as soon as the tax year is ended ( after 5th April).
This can be done online.
5.How much does this cost if i ask an Accountant to do it?
The basic cost should be just over £100 for a simple return done early in the tax year (basically accountants don’t like everyone asking for their returns to be done in January the last month before penalties start to be charged). However you do need to be careful as some accountants will charge a percentage of the refund or maybe ask an unusually high fee. We see prominent online services asking £300 plus for the basic return.
Subbie refund summary
Register with the tax man – this means you will have 20% deducted and not 30%.
Keep all the payment advices as they will back up your claim for a refund.
Make sure any tax deductible expenses such as materials,safety wear and appropriate travel is claimed.
Complete your tax return as soon after 5th April as possible. No point in delaying.