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If you are a sub-contractor, and are registered on the Construction Industry Scheme (CIS), you could be owed a CIS tax refund, but what expenses could you claim for tax purposes? Are there special tax and accounting rules for sub-contractors?  

Many sub-contractors don’t realise how much they are entitled to claim. That’s where you might find our tax refund guide with main expenses categories and key rules helpful:

Cost of goods bought for resale or goods used:

• Materials you supply to the building project or re-sell to customers.
• If you take any of these materials from stock for your own use or consumption you will have to treat this as a sale at market value. There may be VAT implications i.e. if these items are standard rated when sold.

Construction industry: payments to sub-contractors:

• Gross amounts paid to your sub-contractors.
• You should always carry out an Employment status check to ensure your workers are self-employed. 
• If you engage contractors or sub-contractors you will need to be registered as a contractor and report for tax under the Construction Industry Scheme.

Wages, salaries and other staff costs:

• If you hire any staff, perhaps another labourer to assist, you should first perform an Employment Status check to decide whether they are your employees or self-employed.
• Gross wages or salary paid to them is tax-deductible.
• If you pay employer's National Insurance (NI) you may be able to claim back the National Insurance employer’s allowance via your payroll. You cannot claim NI if you have claimed it back.
• If your staff are employees you need to operate Pay As You Earn and deduct tax and National Insurance. You will need to use Real-Time Information (RTI) to report to HMRC.
• If you provide Benefits in Kind, the cost of those benefits and any Class 1A NIC will be tax-deductible. You may need to complete P11Ds to report benefits and reimbursed expenses
• Pensions auto-enrolment is now compulsory for employers: this is operated via your payroll.

Cars, van and travel expenses:

• Home to work travel is not deductible if attendance at that workplace is 'regular and predictable'.
• The type of costs that can be claimed depends on whether the business is claiming Flat (fixed rate) deductions or Actual costs.
• The costs you claim will also vary depending on whether you are driving a car or van and private use. (Motor Expenses).
• Capital allowances cannot also be claimed if you are claiming fixed rate deductions. Where claiming capital allowances, adjustments must be made for private use.
• Speeding, parking and congestion charge fines are not tax-deductible. 
• Subsistence costs, where a meal or drink is bought during the course of business travel are tax-deductible.
• Accommodation costsare also allowable where the travel is allowable as business travel.

Rent, rates, power and insurance costs:

• Public liability insurance.
• Rent of a yard or warehouse for storage.
• An allowance for the use of your home as an office can also be deducted. This is available for those who work out of their home or for those that deal with business administration at home.
• The type of costs that can be claimed depends on whether the business is claiming Flat (fixed rate) deductions or Actual costs. You can claim a flat rate with no evidence, or you can claim a calculated proportion of costs including a share of:
  • Mortgage interest or rent.
  • Council Tax.
  • Home Insurance.
  • Utilities and water rates.

Repairs and maintenance of property and equipment:

• Small items of equipment can be claimed as an expense, such as small hand tools.
• Repair coststo any equipment would also qualify.
• If you buy higher value items of equipment, with a two-year life or more, such as an expensive drill, they are generally capitalised, but you may get full relief under Annual investment Allowance.

Phone, fax, stationery and other office costs:

• Business use of mobiles and home phone or internet.
• Cost of diary/mileage logbook, folders for receipts etc.
• Pens, paper, ink, stamps, envelopes etc. used in the business.
• Trade magazines/periodicals used to keep you up to date.
• Subscriptions, IT costs and software used for your business e.g. bookkeeping software, office software and business Apps.

Advertising and business entertainment costs:

• Adverts in papers or online.
• Costs of running a website.

Interest on bank and other loans:

• Cost of financing the purchase of business equipment or working capital.

Bank, credit card and other financial charges:

• Bank charges or credit card charges, where it can be shown they are business-related.
• Easiest to prove if there is a separate bank account for the business.

Accountancy, legal and other professional fees:

• Trade association or professional body membership fees and subscriptions.
• Accountancy fees.

Other business expenses:

• Protective clothing, such as steel toe cap boots, trousers with reinforced knees, helmets, hi-viz jackets etc.
• Cost of a uniform, for example where you have a t-shirt with your business logo. You cannot claim for ordinary clothing.
• Costs of cleaning these items can also be claimed if proved that it is only used to clean these.
• Training costs, where you are keeping skills up to date. The cost of training for a new skill or getting a new qualification is a capital cost and disallowable.

Trading and property allowance:

• If the total of the above costs is less than £1,000, you can instead claim the Trading Allowance, which is a fixed £1,000 deduction from profits. No other expenses can be claimed.

We hope this guide will make things clear and will help you to fill out your tax forms.  

If you need further help or have any questions, do not hesitate to contact us - we offer professional and affordable services for CIS subcontractors from the fixed price of £95.

You can contact us here.