Completing tax returns is an often daunting and complex process for anyone, from sole traders to business owners. At ZATRS ACCOUNTING we offer advice and assistance to make the process of tax planning and tax returns less stressful and keep it as smooth as possible. In certain industries there are specific types of tax return that need to be completed, including the construction industry.
Whether you are self-employed or a contractor, if you are registered with the Construction Industry Scheme (CIS) then you are responsible for paying correct tax and National Insurance, and it is highly likely that you are required to submit a CIS self-assessment tax return.
What is the Construction Industry Scheme (CIS)?
The CIS exists to prevent fradulent employment and tax evasion in the construction industry. Under the scheme, contractors deduct money from payments made to subcontractors and pay it directly to HM Revenue and Customs. These count as advance payments towards tax on behalf of the subcontractor. All contractors in construction are required to be registered for the scheme which has existed since 1971. Subcontractors are not legally required to sign up but the deductions from their payments increase if they are not registered.
What is a CIS Self-Assessment tax return?
If you are signed up to the CIS then it is crucial that you perform a self-assessment tax return which discloses your earnings for the financial year. Once assessed by HMRC this will determine whether the advance tax contributions have been overpaid or underpaid. Usually HMRC will notify you in order to remind you that a CIS self-assessment tax return is due.
If you are a Sub contractor, 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 on a regular basis if possible. We have listed below the most common expenses which can save you tax.
Basically any expenses that you have incurred which are wholly and exclusively for your work are tax deductable.
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 you 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.
Expenses you can claim
- Materials used for your work
- Consumable tools
- Repairs & maintenance of equipment
- Protective clothing such as Overalls and Work Boots
- Laundry & Cleaning
- Telephone Landline – Business use
- Mobile Phone – Business Use
- Postage & stationery
- Use of home as office
- Computer consumables
- Trade Magazines
- Bank charges on business account
- Accountancy fees
- Fares & Travelling expenses
- Subsistence (if working away from home)
- Other sundry items
Vehicle running costs
If you use your vehicle for your own personal use then you need to factor this in when any expenses are claimed. For example if you calculate that you use your vehicle 30% of the time for personal or family use, then you would need to reduce any relevant vehicle running expenses by 30%. You can claim below against your vehicle running costs
- Repairs & Maintenance
- Road tax, insurance & MOT
- Parking & Tolls
An alternative to claiming the vehicle running costs is the HMRC’s Fixed Scale Mileage Rate which is currently 45p per mile for the first 10,000 and 25p thereafter. This includes a depreciation allowance (capital allowance) for the vehicle but does not include interest on any loan to purchases the vehicle. This can be claimed in addition to the mileage allowance.
Capital Allowances can be claimed on assets used for your business and work, such as a car, van, truck or plant & equipment. You can claim an allowance of up to 100% in the year of purchase on certain items although cars are restricted to 18% per annum in most cases. Also assets you owned before you started the business may also be claimed if you use them now for your business.
If you need help on CIS Subcontract Self-Assessment tax return or if you have any questions around CIS Self-Assessment tax return, please contact with zatrsaccounting professional accountant.
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