Construction Industry Scheme and CIS Refund in a Limited Company
It’s compulsory for a contractor or a subcontractor to become a legit taxpayer. To control the liability, a contractor or a limited company registered under the Construction Industry Scheme will have to cut a certain percentage of amount from the payment to their subcontractors. If a subcontractor is registered with CIS, they will be able to reduce their tax cut from the contractor. If a limited company is registered under CIS, they will have the same edge.
If the subcontractor is registered with CIS, the deductible percent will be 20% but if the subcontractor is not registered with CIS, the deduction amount will go to 30%.
The contractor accounting scheme pays those deductions to HMRC as an advance tax liability for the subcontractor. A subcontractor, on the other hand, can apply for “gross payment status” by which they can get the payment without deductions and pay directly to HMRC for their tax liability.
Besides the capital allowance, a limited company is liable to its assets including used vehicle accounting scheme, furniture, buildings, etc. to pay the taxes.
In case your contractor deducts your taxes while you are registered as a limited company under CIS, then HMRC will return the due amount directly to your company at the end of the year. There are three situations which change how a contractor can deduct the taxes. We will discuss them in detail below.
If Your Limited Company is only a Subcontractor
Being a subcontractor, if you face a deduction from your payment, while your limited company is registered under CIS and you have no other subcontractor working under you, then you can have your deducted amount back from HMRC.
Your contractor will have to submit a monthly report to HMRC stating all the deductions. Your company will then submit EPS (Employment Payment Summary) to HMRC in which you will include your deducted amount by your contractor. At the end of the tax year, after submitting an online form through the government website, HMRC will either return the full amount or they will deduct the tax for your limited company.
When Your Limited Company is a Contractor
If your limited company is paying other subcontractors, then you will have to submit a monthly report which includes all the CIS refund deductions you made from your subcontractor’s payments. The report must include every deduction in details and should be about any individual or business you employed as a CIS registered one.
If you find difficulties, you can always find accountants anywhere else in London who can guide you in details over a small charging amount.
If Your Company is both, Contractor and Subcontractor
If you have a contractor and some subcontractors working for you, then there will be multiple situations. Your contractor will make your CIS deductions and you will make CIS deductions from your subcontractor’s payment. Both will submit the monthly report to HMRC and then expect the returns from HMRC at the ending year of tax. According to some experienced chartered accountant Crawley, the returning amounts will be based on the remaining amount.