If you’re a construction worker who’s paid under the Construction Industry Scheme (CIS), you may be entitled claim a CIS refund. How does that work? Well, under CIS, contractors deduct tax from their subcontractors’ payments before they receive them. This sum is then sent directly to HMRC. Sometimes, the total tax paid for that year surpasses the amount owed. The good news is, you can claim that money back through a HMRC tax rebate!
Read this blog to find out how to claim tax back.
What is CIS and how to claim tax back
CIS is a tax system that was designed to combat tax avoidance and make sure all self-employed construction workers paid tax on income earned. As a result, contractors who employ subcontractors are now required to make tax deductions before they pay their workers. For those not registered under the scheme, income is taxed at 30% and for those who are registered under CIS it’s 20%.
Although contractors will handle the deductions, these payments don’t always represent your final tax liability so it’s important you double check to see if you’ve overpaid. That’s where claiming back comes in – if too much tax has been deducted, then you’re eligible to claim a tax rebate. This is done through your self-assessment tax return (SATR) form.
Am I eligible to claim tax back?
To be eligible to claim a CIS refund you need to:
- Be a subcontractor working in the construction industry
- Have paid too much tax under the CIS during the tax year (i.e. total tax deducted is higher than your tax liability)
- Be self-employed or working through a limited company as a subcontractor
- Have worked for at least one contractor during the tax year (from April 6th to April 5th)
A step-by-step guide on how to claim tax back
1. Gather Your CIS Tax Refund Documents
Before you can claim your CIS rebate, make sure you have all the necessary paperwork and proof ready to go. That includes:
- Invoices: If you’re a self-employed subcontractor, have your invoices handy. They should show any work completed and payments received
- Payslips/Payment Statements: These will show how much tax has been deducted from your earnings and will be crucial for your calculations
- UTR (Unique Taxpayer Reference): You need a UTR number if you’re registered as self-employed with HMRC
- P60 or P45 (if applicable): These documents are essential if you were employed under CIS for part of the tax year
2. Check Your CIS Tax Deductions
The simplest way to know if you’re owed a HMRC tax rebate is to go back over all your payslips and payment statements and calculate the total of tax deducted. Sometimes, errors can occur, and if you’ve been deducted more than the amount you should have been, you can claim it back.
3. Register with HMRC for Self-Assessment
If you’re self-employed, you should already be registered with HMRC for a SATR. If this isn’t the case, you’ll need to look at doing this ASAP. That’s because an SATR allows HMRC to process your income and deductions and determine whether you’re due a tax refund.
To register for self-assessment, visit HMRC’s website and complete the online registration form. You’ll receive a Unique Taxpayer Reference (UTR) number, which is crucial for filing your tax return so make sure you keep that safe.
4. Submit Your Tax Return
Once you’re registered, you’ll need to complete a self-assessment tax return. This is where you will report all your income, including payments under CIS, and any tax deductions. You’ll also need to provide details of any other income, expenses, and allowable costs.
When filling out your return, make sure to:
- Include the total amount of CIS deductions made by your contractors
- Report any other sources of income you’ve had during the tax year
The tax return will allow HMRC to determine if you’ve overpaid tax under the CIS, so be sure to triple check all the information you record. Inaccuracies and mistakes will not only delay the whole refund process but may also prompt HMRC to make further enquiries or request additional info from you. If you’re in doubt about any part of the refund form, it may be best to consult an accountant who can help you make sure everything is in order.
5. Claim Your CIS Refund
After submitting your self-assessment, HMRC will process your tax return and assess if you’re due a rebate. This can take anywhere between 2 to 8 weeks depending on the info provided. If you’re entitled to a refund, HMRC will send it to you via bank transfer to the account registered on your profile.
To track the status of your refund, simply log into your online HMRC account.
How accountants can help you claim tax back
While applying for a CIS tax rebate is a relatively straightforward process, if you’re worried about making errors, are unsure about a particular step, or just need help gathering paperwork, using an accountant is the best way to go. Not only are they trained professionals who have likely filed countless rebates, using an accountant will greatly minimise the risk of your claim being denied.
The main reasons for CIS rebate claims being rejected are:
- Incorrect or missing paperwork
- Inaccuracies on your self-assessment return
- A mismatch between reported income and CIS deductions
Seeking professional help means you’ll have a trained eye to look over all of your information and help you submit efficiently and accurately.
Baa, here to help you claim tax back
Baa has been helping construction industry workers claim CIS refunds for over 15 years! We’re experienced, we’re knowledgeable, and above all, we don’t require payment upfront. If you want to get back the money you’re owed, check out our CIS services here and get in touch with our team today to kickstart your rebate.
