CIS Tax Return

Completing your tax return can be one of the most stressful situations that anybody in the building sector faces. Before completing your self-assessment, understanding CIS tax returns is absolutely vital.

What Is CIS?

CIS is an acronym that stands for Construction Industry Scheme. It is a programme that sees contractors deduct money from the wages of their subcontractors before passing it onto HMRC. If you are a self-employed builder, plumber, electrician, decorator, or engineer that has a standard rate of 20% of your wages cut by your employer, you are affected by the CIS scheme.

The monies paid to HMRC are used as an advanced payment towards your self-assessment tax return, which means it’ll have a huge influence on the figure you are due to pay for the tax year. Using the CIS programme also impacts other issues such as mortgage applications.

CIS covers works relating to both permanent and temporary buildings, as well as civil engineering work. Site preparations, demolitions, building, alterations, system installations, cleaning, and interior works can all be incorporated. Essentially, if you are getting paid to work for a contractor, it’s likely that they will deduct 20% of your wages for the purposes of CIS.

Are CIS Users Still Self-Employed?

Yes. Although paying some (or potentially all of your self-assessment tax) through the CIS does blur the lines, you will still be required to fill out a self-assessment each year. Likewise, many mortgage lenders and financial institutions will continue to treat you like a standard self-employed sole trader – however, this is something we can support you with.

In order to complete your self-assessment, you’ll need to register to the HM Revenue & Customs (HMRC) portal and have your UTR (Unique Tax Reference) to hand. When completing your self-assessment, you must include the following:

Income

Your income should include all revenue and payments received during the financial year, whether you worked for one contractor or several different clients throughout the year.

Losses

The tax relief gained on your losses can amount to either £50,000 or 25% of your adjusted total income. 

Interest

Interest payments incurred from bank accounts.

Business Expenses

Tax relief can be gained for business expenses should exclusively cover purchases needed for the sole purpose of the business. Petrol, tools, work clothes, and associated goods are all included.

Payment Deductions From Contractors

This is where the 20% CIS payments will be used. Whether you’ve paid 20% on all works or a percentage of the works doesn’t matter.

Where To Find CIS Contributions

If you’re unsure as to whether you’ve had CIS tax deducted, the fee should clearly be stated on any payment or CIS statement received by the primary contractor in relation to your subcontracting works.

Stay Up To Date With Your CIS Tax Return

While online self-assessments have made life a little easier, it is still a relatively time-consuming process. As such, it’s important to file your CIS tax return ASAP. Otherwise, you could face penalties from HMRC for a late or inaccurate return.

Whether taking the DIY approach or calling an expert, those completed CIS tax returns will make mortgage applications far simpler too.

About CIS Mortgage Advice

At CIS Mortgage Advice, we specialise in helping CIS contractors find the right mortgage, where they might otherwise be refused by a mainstream lender.  

Contact us today and one of our mortgage advisers can give you an initial Fee Free, no-obligation telephone assessment. 

During this initial call, we will calculate how you may borrow based on your CIS day-rate before tax, instead of using an average of your last two year’s self-employed income which most banks will ask for. 

Subject to providing us with evidence of your income and identification we can even obtain an instant provisional lending agreement.

If you’ve only been a subcontractor, or self-employed, for less than a year, then our mortgage advisers can even help you get a mortgage without having to complete 2 or 3 years of accounts.

Give us just five minutes of your time, and we can advise you how much you may be able to borrow on a CIS mortgage.