CIS TAX REBATE- A BRIEF OVERVIEW
Do you know that more than 33% of construction workers in UK end up paying too many taxes each year? If you are a worker in construction industry and you feel you have overpaid, you have a right to take back the extra amount paid. You will be happy to know that you can claim the refund or the CIS Tax Rebate for last four accounting years. Possible Average CIS tax rebate are about £80 million each year.
You can file for a CIS Tax Refund if you have worked for at least 2 construction sites with one company; or if you use your own transport/public transport to reach work. New filers of CIS Tax Rebate can get up to £2,500 for four years. This is good money and on top of all, this is your money. Look for the UK Government Guidance on registration and other obligations of subcontractors.
However, in order to be eligible for HMRC tax rebate for subcontractors, you need to be registered as self employed and under CIS scheme. These are two registrations and one does not replace another. If you are registering as a newly self employed you can call HMRC Helpline 0300 200 3504 and register for both.
But if you are already registered as self employed and need to register for CIS scheme, you can call HMRC Helpline 0300 200 3210. You need to apply for CIS Tax Rebate. You can claim either online or by post by filling a CIS Tax Rebate Form. CIS Tax rebate is not automatically credited to your HMRC tax account ever. The contractor for whom you work will use your UTR before first pay to determine your tax deduction rate.
Be sure to read What is a Tax Reference Number and where can I find it? if you have any confusion regarding UTR.
UNDERSTAND CIS SCHEME BEFORE YOU CONSIDER CIS TAX REBATE:
Under the Construction Industry Scheme, contractors deduct a portion of pay at source before disbursing payment to subcontractors. It is responsibility of the contractor to pay this money to HMRC which will count towards subcontractor’s NI and taxes. This means for all subcontractors, taxes are paid in advance.
All registered subcontractors under CIS scheme, will have payments deducted at 20%. Unregistered subcontractors need to pay 10% more; i.e 30%. One of the reasons for overpaid taxes is that when subcontractors register at the end of year, they will get a reduced rate and will therefore be eligible to file for CIS Tax Rebate.
However, the reason for overpayment by large so far is that the deductions do not account for personal allowance. Every UK tax payer is entitled to a tax free range of income. The personal allowance for the most recent tax year has been set up at £11,500. This was previously set at £11,000. If you want to see if you are eligible for CIS Tax Rebate, talk to us!
HOW LONG DOES A CIS TAX REBATE TAKE?
CIS tax Rebate is submitted along with your annual tax return. You will have to allow HMRC up till eight weeks for security checks and procedurals tasks before your refund is sent to you. It may take longer if it is a busy time of year or if there are unusual or complex circumstances attached to your individual case. This time scale takes assumption that all your records are complete.
The deadline for paper tax return submission is 31st October. You get additional three months up till 31st January if you are filing online tax returns. However, this is the deadline when HMRC must receive your tax returns along with payment and not when you send them. Missing deadlines can impact your Tax claims and refunds.
WHAT SHOULD YOU KNOW FOR FILING CIS TAX RETURNS?
In order for you to complete your CIS Tax Rebate Form completely, you need to know details of your income and expenses. You are advised to keep record for last six years minimum. Make sure all your records are complete in case HMRC asks you for additional evidence for any rebate claim. Incomplete record may render you ineligible for CIS tax rebate.
You will get all your income details from Pay slips or CIS statements from your contractor. Take into account your P45 or P60 also if you have a PAYE employment also. Bank statements are also very useful part of documentary records for CIS Tax Refund. You should also include details of any benefits that you receive. Any negligent reporting or misreporting will result in huge penalties.
Go in more depth with our previous publications WHAT IS A P60 FORM? WHAT DETAILS IT CONTAINS AND WHY SHOULD YOU SAVE IT
You will be required to provide evidence of your CIS subcontractor expenses. Allowable expenses will bring down your tax liability. Acceptable evidence may include receipts, bank statements, Mileage logs and MOT certificates. HMRC may render certain evidence as inacceptable but you have a right to appeal if you are willing to go in negotiation with the tax man.
And this is where you will need the help of an experienced accountant. How to calculate the CIS tax Rebate may seem easy in theory but in truth, it is very complicated. If you are looking for A CIS tax accountant, your search is at end now. Contact Certax Fitzrovia for accounting, book keeping, payroll and startup services. We also do tax consultancy, self assessments, CIS Tax Rebate and VAT returns.