The Construction Industry scheme
If you are a sub-contractor working in the construction industry, then you are running your own business, and are officially classed as ‘self-employed’.
The invoices or timesheets that you give to your main contractor are subject to deduction of CIS tax, usually at 20%. The deductions made by your main contractor, are in effect, payments on account they make to HMRC in respect of your expected income tax and national insurance.
The contractor is obliged by law to issue you with a monthly earnings and deductions certificate which states the gross amount that you’ve invoiced and the tax you have had deducted and passed to HMRC by the main contractor.
At the end of the tax year (5th April), your business accounts are prepared to determine the profit you have made from self-employment. The profit is calculated by taking your revenue – usually the invoices you have issued to your main contractor – less the costs that you have incurred in operating your business.
These costs usually include items such as material costs, travel expenditure etc. etc.
The profit that your business has made is then assessed to income tax and Class IV National Insurance, taking into account, the CIS deductions that your main contractor has already deducted.
Quite often, sub-contractors in CIS are due a refund from HMRC at the end of the tax year, but not always.
At the end of the tax year, you have until the 31st January in the next year to file your self-assessment return, but if you believe you have overpaid tax, it is generally in your interest to get it done sooner.
Give Robinson Price a call, if you’d like assistance with preparing your self-assessment return under CIS.