You’d be amazed to know that one out of three construction workers pays excessive taxes that are estimated at around £80 million each year. So, if you are one of them, you should know that you can claim a CIS tax refund for the last four years and can make around an average of £2,500. In this blog, we’ll specifically focus on limited companies that work under CIS. If your limited company works in the construction industry, you need to know how to get a CIS refund limited company. Let’s find out!
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Who Needs to Register for CIS?
You are required to register yourself for the Construction Industry Scheme (CIS) if you are providing your services to a contractor and fall under one of the following:
- You’re a sole trader
- Limited company owner
- A partner in trust or partnership
Under this scheme, contractors deduct 20% of your payment/ wage and send it directly to HMRC. These deductions are considered an advance payment towards your tax and National Insurance liability. Bear in mind that, if you fall under the above categories and haven’t registered for CIS, the contractor will deduct 30% from your payment instead of 20%.
If you don’t want to be charged in advance by the contractor, you need to apply for gross payment status. Here, we’d focus on the gross payment status for a limited company.
Contact us to register for CIS now.
Gross Payment Status for a Limited Company
To get the full payments from your contractor without any deduction, you need to apply for this status:
- When you register for CIS
- After registering for CIS at a later date
But you need to pay the due tax and NI at the end of a tax year. You can apply for this status here or you may contact us to do the hassle for you on your behalf.
Eligibility for Gross Payment Status
If you are the company owner, secretary, or director, you need to pass some tests and make sure that:
- Your limited company has paid its previous tax and National Insurance
- You are operating your company via a bank account
- Your business performs construction or provides labour for it in the UK
To qualify for this status, HMRC will check your 12 months’ turnover (without considering VAT and material cost) which needs to be at least £30,000 (for each company director), or at least £100,000 (for the whole company)
How You Pay Tax When you Have Gross Payment Status?
As a limited company owner, you need to show your income at the year-end in your Corporation Tax Return. Bear in mind that if you are a sole trader or a partner, you need to declare it via a Self-Assessment Tax Return.
How to Get CIS Refund Limited Company?
Once you get your gross payment status, show all your income from your Corporation Tax returns, and pay the CIS deductions, you are eligible to claim a CIS refund for your limited company through the company’s monthly payroll scheme. To do it you need to:
- Send your monthly Full Payment Submission (FPS) and Employer Payment Summary (EPS) to HMRC
- HMRC will deduct your CIS deductions that you owe in PAYE tax and NI.
If there are any unpaid CIS deductions from the PAYE, they will be transferred either to the next month or quarter for that tax year. In addition, you need to inform HMRC that you owe nothing to it.
Beware that you may be levied a penalty by HMRC if you try to claim a CIS refund through your Corporation Tax return.
If your claim is incorrect as per HMRC, you need to provide proof for your CIS deductions or make the required changes. If you don’t do this before the deadline, HMRC itself will make corrections. But in such a case, you’ll not be allowed to make more claims that year.
Quick Sum Up
We hope that you got a basic understanding of how to claim a CIS refund limited company. To get the refund through the company’s monthly payroll scheme, you first need to apply for gross payment status and need to be registered for CIS. Moreover, you also need to pay your CIS deductions to get a refund. Remember, you may be charged with a penalty if you claim back refunds through the Corporation Tax return.
Still, have a question? Get in touch with us.
Disclaimer: This article intends to provide general information based on CIS refund limited company.
