If you’re one of the lucky ones who obtained gross payment status when you registered for the Construction Industry Scheme (CIS) then you need not read any further. CIS deductions is one of the most contentious issues with subcontractors that are on the net basis as it impacts their cashflow and if you are a limited company, there is further headache of chasing the Revenue for your refund each year, which usually arrives months after your corporation tax payment deadline has passed.
If you are on the net basis I would recommend that you review the gross payment status requirements to see if you now qualify. To qualify you must show HMRC that your business passes some tests. You’ll need to show that:
- you’ve paid your tax and National Insurance on time in the past;
- your business does construction work (or provides labour for it) in the UK; and
- your business is run through a bank account.
HMRC will look at your turnover for the last 12 months. Ignoring VAT and materials recharged to customers, your turnover must be at least:
- £30,000 if you’re a sole trader;
- £30,000 for each partner in a partnership, or at least £100,000 for the whole partnership; or
- £30,000 for each director of a company, or at least £100,000 for the whole company.
If you’re already registered for CIS and you wish to apply for gross payment status, then please email me.
If you do not qualify for gross status and you are a limited company, there is a bit of good news. The Revenue updated their processes last year and have made it easier to reclaim your refund. You can either claim a repayment online using their form (you’ll need a Government Gateway account for HMRC online services – you can set one up from the sign-in page) or by post. If you are writing to the Revenue make sure that you include:
- your full company name;
- your PAYE reference number(s); and
- the reasons for the overpayment.
You don’t have to send any supporting information with your claim, but HMRC may request further details if your claim doesn’t match their records. Mark your claim ‘CIS’ and send it to:
National Insurance Contributions and Employer Office
HM HMRC and Customs
Alternatively, you can request the Revenue to deduct your repayment from your Corporation Tax liability, VAT liability or any other liabilities that you owe. For Corporation Tax, include your Corporation Tax unique tax reference number and either the end date of your accounting period or accounting period number in your letter. For VAT include your VAT registration number and the VAT Return period you want the refund allocated against. For all other liabilities include the type of charge, year or period it refers to and any reference numbers you have.
If you make a mistake or you find that you haven’t included the full amount you can amend your claim by either completing the online form or by making an amended claim by post. If you amend your claim in writing, mark it ‘revised claim’, state the full amount you’re claiming and remember to refer to your original claim.
So I suggest that you review your corporation tax payment date and align this with the tax year end so that you can apply to allocate your CIS refund against your corporation tax liability each year, and any excess against your VAT liability, which should help with your cashflow. Hopefully the days of waiting six to nine months for a CIS refund are over!
For further advice, contact me at firstname.lastname@example.org or give me a call on 020 8418 2710.