We are a UK CIS Tax Returns and Refunds Specialist company with expertise in:
- Construction Industry Sub-contractors CIS Tax Returns and Refunds – If you work in the construction industry and you have a unique tax reference number which you have supplied to your contractor, they may have automatically deducted either 20% or 30% income tax from you. The vast majority of CIS workers are entitled to claim expenses via CIS Tax Returns and Refunds. We help 100′s of clients by calculating and computating the tax returns on their behalf, which results in tax refunds.
We also specialise in the following:
- (PAYE) Returns and Refunds – We help our clients offset expenses against HMRC Pay As You Earn (PAYE). Such expenses could include mileage, fuel expenses, overnight expenses or any other expenses incurred through carrying out the execution of their work / duties / employment.
- Self Assessment (SA) Returns and Refunds – We calculate and complete Self Assessment on behalf of our clients. This could result in a tax refund.
- Book Keeping for Small Businesses – We maintain our clients books in accordance with HMRC requirements, this includes expenses, sales, purchases and wages.
Information about the Construction Industry Scheme and CIS Tax Returns and Refunds
The Construction Industry Scheme (CIS) is a tax deduction scheme, applicable when payments are made by a contractor to a subcontractor.
Outline of CIS
CIS will apply if the subcontractor passes three tests – known as the business, turnover and compliance tests – and registers with HM Revenue and Customs. If these are satisfied then the subcontractor will receive gross payments from the contractor.
The best scenario is when the subcontractor registers for gross payments with HMRC, however, if the subcontractor is not eligible because it fails one of the three tests, we still advise the subcontractor to register with HMRC to ensure that tax is only deducted at the lower rate of 20% instead of the higher rate of 30%.
When does CIS apply?
The CIS regime applies to all contractual payments outside of the normal employment contract. CIS applies when one party is a contractor and the other is a subcontractor.
Contractors typically include property developers, builders, and other construction workers. A subcontractor is an individual whom receives payments for construction work and is under a duty to the contractor to carry out the construction operations.
The CIS tax deduction scheme applies when payments are made under a construction contract – even if the contract covers matters other than the construction operations alone, the tax regime will still apply. If the contract is intended to cover other matters, it should ideally be split to ensure that non CIS payments are kept separate. There are a number of exemptions, but these are beyond the scope of this text.
What is the effect of CIS applying?
The CIS tax deduction scheme requires the contractor to deduct tax at source on any payments made to the subcontractor. The rate at which tax will be deducted depends on the registration status of the subcontractor:
- if the subcontractor is not registered, then the contractor must deduct tax at a rate of 30% from payments it makes to the subcontractor, excluding VAT and the cost of materials;
- if the subcontractor does register, but is ineligible to receive gross payments, the contractor must deduct tax at a rate of 20%. This must exclude VAT and the cost of materials.
- if the subcontractor registers with HMRC and is eligible to receive gross payments, the contractor will not deduct any amounts from the payments at all. It is up to the subcontractor to make tax payments on its annual tax return.
If tax is deducted, then a subcontractor which is a partnership or sole trader can treat this tax as income tax on profits. If the subcontractor is a company, the tax deducted can be treated as satisfying relevant liabilities which are amounts due to HMRC in respect of that company’s obligations as an employer – for example, PAYE or National Insurance Contributions (NICs).
A subcontractor is eligible to register for gross payments if it satisfies three tests:
Business Test - The subcontractor must carryout construction work in the UK, and the business must be run mainly through a bank account.
Turnover Test - This test sets minimum limits on an eligible subcontractor’s annual turnover as follows:
- for an individual/sole trader: turnover from construction work must be at least £30,000;
- for a partnership: the payments the partnership receives under contracts relating to construction operations, excluding the cost of materials, must not be less than the lower of £200,000 and the multiple turnover threshold. The multiple turnover threshold is the sum of each individual in the partnership multiplied by £30,000, plus the sum of the threshold each company in the partnership would obtain if that company were applying on its own behalf;
- for a company: a company’s threshold is the lower of £200,000 and the amount calculated by multiplying the number of directors by £30,000. If the company is a close company for tax purposes – one with fewer than five controlling parties – that company’s threshold is the lower of £200,000 and the amount calculated by multiplying the number of shareholders by £30,000.
Compliance Test – within 12 months ending with the date of application:
- if the subcontractor is a partnership, each partner must have complied with all tax obligations in relation to income tax or corporation tax and supplied all information and accounts requested of them concerning the business or their share in the profits of the business. There are also certain other compliance requirements, such as having paid all NICs that are due and, if the subcontractor is a company, having complied with certain legal obligations under the Companies Act.
- if the subcontractor is a company, the company and each director; or
- if the subcontractor is a sole trader, the individual must have complied with all tax obligations in relation to income tax or corporation tax and supplied all information and accounts requested of them concerning the business or their share in the profits of the business. There are also certain other compliance requirements, such as having paid all NICs that are due and, if the subcontractor is a company, having complied with certain legal obligations under the Companies Act.
HMRC will carry out a review the subcontractor’s compliance each year.