For companies in the construction business or organizations that spend mostly on construction materials, you are eligible for tax refunds or tax return under the Construction Industry Scheme set by the HM Revenue & Customs in UK. The scheme, commonly known as CIS, sets the rules for contractors and subcontractors in the construction industry and eligibility for any tax refund.
To be eligible for CIS tax return, an individual or a company must first determine if the work done is covered by the scheme. Those who are eligible would include the following individuals: (1) self-employed individuals, (2) companies - partnerships and limited liability partnerships, (3) labour agencies, (4) property developers, (5) companies that spend more than £1 million/year for construction over a 3-year period and (6) companies that are based outside the UK but does work in the territorial waters of UK.
Work that is eligible for a CIS tax return would include the following: (1) permanent and temporary building or structure, (2) installations, (3) general construction services, (4) jobs that are outside the coverage of construction work but become part of it if it is done for building of new property or property development.
The following are not covered by the CIS scheme: (1) businesses that spend less than £1 million/year for any construction work, (2) private construction done in one's own property, (3) property investment and (4) businesses that are put up for commercial purposes.
Are You a Contractor or Subcontractor?
Once you have established whether you are eligible or not under the scheme, the next step would be to determine if you are a contractor or subcontractor and what are your duties and obligations under the CIS scheme.
Under the CIS, a company or an individual is acknowledged as a contractor if (1) they run the business of engaging sub-contractors or are considered as mainstream contractors and (2) they spend more than £1 million/year for construction operations. On the other hand, one is considered a subcontractor if they: (1) accept construction projects in behalf of a contractor, (2) are labour agencies, (3) gang leaders, (4) local authorities in direct construction behalf of a contractor, (2) are labour agencies, (3) gang leaders, (4) local authorities in direct construction services.
Registering with CIS services
After determining the classification type you are in, one can now register with the HMRC. Once one is registered, the government agency will set up an account under the scheme or will open a "Pay As You Earn" or PAYE Scheme. A packet is also sent to the contractor for further information. As the government agency requires contractors and subcontractors to submit monthly returns and deductions made, one can conveniently submit it online or contract a small business accountant in London to help them with their monthly reports. The agency will then compile all the expenses and rebate amounts deducted to the contractor's account.
Accountants for CIS registered tradespeople
if you are a registered tradeperson under the Construction Industry Scheme and are looking for a professional accountant in Darftord, Kent to help manage your finances, get in touch with JR Accounting today on 01322 219 121.