The Construction Industry Scheme (CIS) is where a contractor in the construction industry deducts, at source, a certain percentage of the money paid to their subcontractors.  This amount is passed straight to HMRC and counts towards the subcontractor’s self-assessment tax and national insurance bill for the tax year.

The amount deducted will depend on whether or not a subcontractor is registered under the CIS scheme. Unregistered subcontractors usually get a 30% deduction, while registered subcontractors get a deduction at the standard basic rate of tax of 20%.

The deduction rate is a flat rate and does not take into account the tax-free personal allowance that every UK based taxpayer is entitled to.  The personal allowance for the tax year 2019-2020 was £12,500. Because the flat rate deduction does not take account of this, or other business expenses that you can claim, many ‘subbies’ are due a tax refund at the end of the tax year.  The average refund is around £2,000, but will depend on your other income and the amount of expenses that you can claim.

In addition to the UK personal allowance, you can also claim a deduction for business expenses incurred in running your business such travel to sites, insurance, telephone, tools, safety clothing and lots more.

This can be a complex process so to make sure that you are getting the maximum tax rebate let Simply Accounting Solutions help you, our fees are tax deductible too!