CIS reclaims can be a bit of a minefield for a construction business owner that can be pretty complex, where you’re not quite sure how they work and exactly how to get your money back.
Every business owner likes to receive their refunds as soon as possible, so today, we are talking about exactly what you need to consider when doing a CIS reclaim, why they’re important, and also, what is the best way to complete these.
What CIS Reclaims Are?
This is the process you go through to collect back money you’re owed that’s been taken in advance by HM Revenue and Customs.
So, you may have had 20% tax deducted from your labour income during the year, and this is a process that you will go through to reclaim back that money from HMRC and potentially offset it against other taxes. The better records you have for the tax that will be deducted during the year will help this process.
So when you’re thinking about making CIS claims at the year-end and throughout the year, make sure you’re keeping really good records of what’s been deducted from your on a monthly basis.
Making A CIS Reclaim
You will make a CIS reclaim at the end of the tax year; you will already have detailed exactly what CIS has been deducted; you should have vouchers for all of these deductions from the companies that have deducted it that will allow you to reconcile exactly on paper, what’s been deducted to your records that could be on Xero or QuickBooks.
So you want to make sure that at the end of the tax year, you’ve got all of this in line because you’ll be looking to collect every single bit of income tax that has been deducted from your income. This process is quick and straightforward; the earlier you start your reclaim, the earlier you get your money. What we find it’s really successful when we’re making claims for our clients is if you send them the records in advance, where they got the supporting records, the claims get processed quicker.
During the year, you may have had CIS deducted from your income, but you may have also paid for subcontractors. It’s important as part of this calculation; you’ve not only got all the CIS that’s been deducted from your income but also, you’ve offset the CIS that’s been deducted from your subcontractors, and based on that, to claim the difference. Normally, if a company’s got deductions and they’ve paid subcontractors, it’s still going to equate to a refund, but sometimes it doesn’t. So make sure you’ve got a good handle on the balance you’re entitled to.
Offsetting Your Refund
One great thing about this is if there is any balance left, you can offset this against your corporation tax. Having the money deducted in advance does a lot of businesses good, as there is a saving build up which can be offset against corporation tax and sometimes still end up with a refund.
I know many of our clients like that feeling and almost enjoy having the tax taken from upfront. They may not be the best organised, but for them, it just fits them. So, it’s not always just you are good or are you bad with money; it’s also a personal feeling as well.
The more organised you are, the quicker you get out of the starting blocks after your tax year.
I hope this article was helpful, and if you have any questions, I offer a free discovery call to answer any questions you might have without a pushy sales pitch.
