How to complete a CIS self-assessment tax return

Completing tax returns is an often daunting and complex process for anyone, from sole traders to business owners. At Tuchbands 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.

Will I get tax back as a result of a CIS self-assessment tax return?

Because deductions from payments under the CIS are made at a standard rate of 20%, it is common for subcontractors to overpay tax under the scheme. It is therefore likely that you will be able to claim back tax as part of the self-assessment process but not guaranteed.

When do I have to complete a CIS self-assessment tax return by?

The current tax year will end on 5th April 2020. From then you will have until the end of October to complete a paper self-assessment tax return process, and until the end of January 2021 to complete an online self-assessment tax return.

What do I need to do before completing a self-assessment tax return?

Before you begin, you will need to register via HMRC’s online portal and complete an SA100 form, as well as compiling all the relevant information that needs to be included.

What do I need to include in a CIS self-assessment tax return?

Before completing your tax return, you’ll need to find a number of key pieces of information. 

These include:

  • Your Unique Tax Reference (UTR). This is a ten-digit number which will have been issued to you when you registered for the CIS and is how HMRC determines what you have to pay.
  • Full details of your income for the preceding year. This must include your total sales as well as declaration of any additional incomes such as property income.
  • Details of any losses incurred. It may be possible to claim tax relief on these but this is limited to either £50,000 or 25% of your total adjusted income, whichever is greater.
  • Details of interest earned including any interest gains from bank accounts.
  • Payment deductions from contractors (if you are a subcontractor). These need to be added up for the year and details can be found on the statements received from contractors.

Can I reclaim expenses as part of a CIS self-assessment tax return?

You should also include details of any expenses paid for business purposes. If you are a subcontractor you can claim certain expenses back providing that the costs were incurred purely for business reasons. These expenses include tools and materials used for work, protective clothing, repairs and maintenance of equipment and vehicle running costs.

What happens if I miss the deadline for a CIS self-assessment tax return?

If your tax return is submitted late then you will incur a penalty fine from HMRC. This is up to £100 if it is submitted up to three months late, but after this it can increase significantly.