Contractor: Limited Company or Sole Trader?

As a Construction Industry Scheme (CIS) contractor, on top of the normal issues surrounding whether to be a limited company or a sole trader, are there any CIS specific issues to be aware of?

2nd May 2019

From a CIS point of view ONLY there is another factor that can affect your decision when thinking about whether to become a limited company or not.

Being a sole trader, any CIS you and your business suffers can only be reclaimed via your own self-assessment tax return. This means that you can only claim it once the tax year is up, so you do have to wait up to a whole year to get any relief. This relief is obtained as the CIS you suffer (i.e. tax deducted) is, in essence, a payment on account of your tax bill.

Whereas if you were a limited company, then you are allowed to offset any CIS your business suffers against any CIS, PAYE tax or National Insurance deductions that you are due to pay over to HM Revenue and Customs each month. This means that your company gets the relief much sooner and throughout the tax year.

We can help you by looking into your specific situation and help you make the right decision. We can look to see if this situation could benefit your business, so please give us a call and arrange a meeting with us today. 

*This is only looking at becoming a limited company from a CIS suffered point of view and takes no consideration of other factors that could affect this decision. Please seek advice before taking any action. 

By Samantha Skyring FCCA

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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