Misconceptions about Construction Industry Subcontractor (CIS) refunds

The Example

So, a subcontractor with earnings of £20,000 and expenses of £5,000 would incur tax and NI of £631.80, calculated as follows:

• £20,000 – £5,000 = £15,000 total income.
• £12,570 x 0% = £0.00
• £2,430 x 20% = £486.00 tax liability
• £2,430 x 6% = £145.80 national insurance

However, having suffered £4,000 in CIS deductions at source of pay, the individual would obtain a refund of £3,368.20 (£4,000 – £631.80).

A subcontractor with earnings of £40,000 and expenses of £8,000 would incur tax and NI of £5,051.80, calculated as follows:

• £40,000 – £8,000 = £32,000 total income.
• £12,570 x 0% = £0.00.
• £19,430 x 20% = £3,886.00 tax liability
• £19,430 x 6% = £1,165.80 national insurance

However, having suffered £8,000 in CIS deductions at source of pay, the individual would obtain a refund of £2,948.20 (£8,000 – £5,051.80).

A labour-only subcontractor with earnings of £55,000 would incur tax and NI of £11,788.60, calculated as follows:

• £55,000 – £0 = £55,000 total income.
• £12,570 x 0% = £0.00
• (£37,700 x 20% = £7,540.00) + (£4,730 x 40% = £1,892.00) = £9,432.00 tax liability
• (£37,700 x 6% = £2,262.00) + (£4,730 x 2% = £94.60) = £2,356.60 national insurance

Having suffered £11,000 in CIS deductions at source of pay, the individual would owe HMRC the balance of £788.60.

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