Subcontractors can offset CIS against corporation tax as well as other taxes.
Offset CIS deductions during the tax year
CIS deductions which subcontractors suffer during the year can be offset against:
- PAYE/NI payments if the subcontractor has employer taxes
- CIS payments if the subcontractor is also a contractor and makes CIS deductions
For more information on this including examples see our blog CIS repayments.
Tip: At the end of the tax year there may still be CIS deductions to be reclaimed. If this occurs every year and is typically a large repayment then we strongly recommend gross payment status. By going on to gross status you then avoid paying HMRC in advance.
Offset CIS at the end of the tax year
Unrelieved CIS tax deductions at the end of the tax year can be repaid or allocated against other taxes.
You can have the amounts owed:
- Offset against corporation tax
- Paid into your bank account
- Offset against vat
- Offset against other taxes
How to offset CIS against corporation tax?
The first thing to do is to make sure that the tax year has ended. The tax year ends 5th April so don’t try to make a reclaim before the 6th April. This can then lead to mistakes within HMRC systems and subsequent delays in processing.
The CIS repayment request can be sent to HMRC by post. The information you need to include in the letter is as follows:
- The company name
- The PAYE reference number
- The amount reclaimed
If the claim is to offset CIS against corporation tax the letter also needs to include:
- The company unique tax reference (UTR)
- The accounting period to offset the CIS against
- Also state ‘offset CIS repayment against corporation tax’ within the letter
You don’t need to include any calculations, however if the reclaim doesn’t match HMRC calculations they will request further information.
The address to send the letter to is:
National Insurance Contributions and Employer Office
HM Revenue & Customs
Reclaim CIS deductions alternative options
Other options include repaying into a bank account, offset against VAT and offset against other taxes. To do either of these follow the instructions above ‘how to offset CIS against corporation tax’.
Don’t include in the letter the information including the company unique tax reference or accounting period. Instead replace it with the following:
For refunds into a bank account:
- Bank account number
- Sort code
- Bank account holders name
- Also state ‘repay CIS into this bank account’ within the letter
To offset against VAT:
- VAT registration number
- VAT return period
- Also state ‘offset CIS repayment against VAT’ within the letter
To offset against other taxes:
- Include the name of the charge
- Any reference numbers relating to the charge
- The year or period the charge relates to
- Also state ‘offset CIS repayment against …’ within the letter
The letter should be sent to the same address as offset CIS against corporation tax which is stated above.
As well as sending the above information by post. It is possible to claim any CIS deductions using a HMRC online account.
Those subcontractors which have a HMRC account can just click on this link, log in, and then complete the form.
Subcontractors with large repayments should consider gross status. No business would choose to pay other taxes in advance and then wait for a repayment.
When applying for the refund make sure that your calculations are correct. If they differ to HMRC figures this can then delay the repayment by several weeks if not months.
To ensure no delays in repayments we do the calculations and write the letter to HMRC on behalf of our clients. For more information on our services please do not hesitate to contact us.
At Patterson Hall Chartered Accountants we are experts within all aspects of the Construction Industry Scheme. We have produced an ultimate guide to all things CIS with many user friendly helpsheets and examples. Take a look at our CIS Accountants guide.
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer