Whether you are a builder, construction contractor, or a subcontractor operating in the UK, you are required to register with Construction Industry Scheme (CIS). Working via CIS, you are expected to file self-assessment tax returns after your first year of trading and after years of being operational.
If you are a subcontractor registered for CIS, your deductions stand at 20% – if you are not registered under the scheme, the deductions rise to 30%. Hence, it works in your favor to be a registered subcontractor.
Under CIS, contractors make deductions from subcontractor payments and pass these on to HMRC as advances towards subcontractors’ tax and NI. Subcontracting under CIS means your self-assessment filing has a couple of extra points to consider. If you don’t understand the system, it’s easy to end up paying a lot of extra tax you don’t owe.
At Audita, we ensure you are able to claim the maximum allowable expenses, so as to maximise your CIS Tax rebate at the end of the year.
Choosing how you work is probably the most important decision you’ll have to make when starting out in business.
As a contractor, you can kick-start your own business in one of four ways:
- Working as a sole trader.
- Setting-up a limited company.
- Joining an umbrella company.
- Being paid through a recruitment agency.
Deciding which option you take involves weighing up the risks and rewards of each. Our team is on hand to help you make the right call.
IR35 is a piece of legislation that can apply if you’re working for a client through an intermediary or ‘middle man,’ whether it’s another person, partnership or limited company (sometimes called a ‘personal service company’).
It’s there to ensure that you pay the right amount of tax and National Insurance contributions (NICs) when your relationship with a client is pretty much the same as an employer-employee relationship – where tax and NICs are paid through the Pay-As-You-Earn (PAYE) system
If you work as though you’re outside IR35, but HMRC finds that you’re actually inside it, you can incur penalties and be charged interest on underpaid tax and NICs. So, it’s important that you have an expert consider your situation so you can find out where you stand.
If you’re a sole trader or work through a limited company, your take-home pay can be much higher if you register for Value Added Tax (VAT) – normally, on the Flat Rate Scheme (FRS).
If you sign-up to the FRS, you pay over a smaller proportion of the VAT collected from your clients and keep the balance, which may mean significant savings and increased profits for your business in the first year.
What’s more, if your clients are VAT-registered, they can reclaim the additional 20 per cent you charge them when they file their VAT Returns, so it won’t cost them a penny. So, it’s a win-win situation for you and your clients.