If you have Construction Industry Scheme (CIS) tax deducted from you at source the process of which you can reclaim any over deduction of tax differs depending upon your status as either self-employed or limited company.
Claiming CIS back as Self-employed
Nice and simple – you reclaim you CIS deductions suffered in your self-assessment tax return. This is then deducted from total tax owed to either bring the tax liability for a tax down or to result in a rebate in the case of being over taxed.
If a rebate is due this should be paid directly into your bank with no further tax consequences.
Claiming CIS back as a Limited Company.
Instead of claiming the CIS deducted on your self-assessment return CIS is reclaimed using the end of year PAYE P35 return.
Once the P35 has been submitted a letter needs to be sent to a specific HMRC office requesting that the relevant amount be paid back to the company. Once the company has received these funds you can then extract them as part of a dividend or some other form of remuneration providing that the company has the available retained earnings in its accounts.
If, as a limited company, you employ staff / deduct CIS from other subcontractors you can offset the monthly PAYE/CIS liability by the amount of CIS tax your company has incurred. It is then the remaining balance of CIS incurred at the end of the tax year that is reclaimed for.
If you require any additional guidance on this topic or you are a self-employed contactor seeking to set up a limited company please do not hesitate to contact us.