For subcontractors working under the Construction Industry Scheme (CIS), understanding which expenses are allowable can be the difference between an optimised tax return and potential issues with HMRC. This guide dives deep into the world of CIS expenses, providing clarity on what you can and cannot claim, ensuring you maximise your tax efficiency legally and effectively.
Allowable Expenses for CIS Tax Returns
Staff and Labor Costs:
- Employer’s National Insurance Contributions (NICs)
- Subcontracted labour costs (without deducting tax)
- Employee benefits, wages/salaries, and pensions
- Employment agency fees
Professional Fees:
- Fees for architects, accountants, solicitors, and surveyors
Travel and Accommodation:
- Costs for travel, accommodation, and food when working away from home
- Vehicle costs including parking, fuel, insurance, and repairs
- Tickets for transport modes like planes, buses, taxis, and trains
Office and Administration:
- Stationery, postage, printing, and office supplies
- Costs for computer software, phone, internet, mobile, and fax services
Professional Subscriptions:
- Trade Union membership and subscriptions to professional bodies or journals
Financial Expenses:
- Business insurance policies
- Interest on bank/business loans, credit card charges, and other finance-related payments
Utilities and Premises:
- Costs for power, rates, rent, insurance, and security for business premises
- Home office expenses, provided there’s a specific work area
Materials and Goods:
- Costs of goods and raw materials for resale or use in construction projects
Marketing:
- Advertising costs, including online, mail, and print ads
Maintenance and Repairs:
- Maintenance and repairs to business premises and equipment
What You Cannot Claim
Personal and Capital Expenses:
- Personal rent or mortgage payments
- Everyday food and beverages not related to work away from home
- Personal travel or commuting costs
- Capital expenses, including large equipment or machinery (eligible for capital allowances instead)
Non-Business Related Costs:
- Legal fees for non-business activities or tax disputes
- Expenses related to personal elements of professional subscriptions or entertainment
Understanding Dual Purpose Expenses
If an expense serves both personal and business purposes (dual purpose), you can only claim the business portion. For example, if you use your vehicle for both work and personal activities, only the business-related mileage can be claimed on your CIS tax return.
Supporting Evidence for Your CIS Tax Return
To back up your claims, maintain and store (for at least 6 years) documentation like:
- Invoices and CIS statements of earnings
- Mileage log books and bank statements
- Purchase receipts and records of any other income
Other Considerations
Calculating Your CIS Tax Rebate:
Your tax is calculated on your profits (Income – Expenses = Profits). Legitimate expenses lower your tax bill, making it crucial to include all relevant income and expenses in your tax return. The Subbie Tax App will help with all this!
Common Allowances:
- Mileage allowance for business travel
- Costs for protective clothing and equipment necessary for safety on-site
- Business portion of phone and internet expenses
- Use of home for business purposes, either through specific calculations or a flat rate
Understanding and claiming allowable expenses under CIS can significantly reduce your tax liability and ensure compliance with HMRC regulations. By differentiating between allowable and non-allowable expenses, and maintaining proper records, you can navigate your CIS tax return with confidence.
Did You Know?
There are several lesser-known expenses you might be missing out on. This includes costs for cleaning your work clothes, certain training courses, and even union fees. Every penny adds up, and our goal at Subbie Tax is to ensure you claim them all.
Navigating tax claims doesn’t have to be a headache. With Subbie Tax, you have a partner who understands the unique needs of CIS workers. We’re committed to maximising your tax return, ensuring you claim all that you’re entitled to. Ready to make the most of your tax return? Get in touch with us at 01782 366873
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