All subcontractors in the construction industry must complete a personal tax return each year.
This is so that HMRC knows how much you earned, how much money has been spent on your business, and how much, if any, CIS tax you have already paid.
It is important as a subcontractor that you register for CIS, otherwise the penalties can be very costly, and your tax rate will rise from 20% to 30%.
When registering under the Construction Industry subcontractors scheme you will be asked to provide the name of your company and your unique taxpayer reference (UTR).
You can decide whether you want your contractor to pay you under your registered business name or the trading name that was provided to HMRC.
Once this is done, your contractor will pay you ‘under deduction’, normally at a rate of 20%, this should cover your tax and national insurance for the year.
Most over-pay tax in this way because it doesn't consider the money you spend on tools, VAT, materials, plant hire, or consumable stores.
Most subcontractors each year are entitled to a tax refund; on average sub-contractors get a tax return of £2500 per year as most will have paid more CIS tax than they owed HMRC.