Limited Company Construction Industry Scheme Deductions

I run a small building maintenance company and some of the work we do falls under the Construction Industry Scheme. Consequently, the business who contracts us for the work deducts 20% tax at source under the scheme on all amounts we invoice for labour. How do we offset these deductions against our Corporation Tax liability, and if so, how?

1st April 2009

Under a previous CIS scheme companies that had tax deductions made from their income were only able to use these deductions to reduce their final Corporation Tax bill.

However, a change to the scheme in April 2002 enabled sub-contractor companies to offset CIS deductions made from their income against the monthly or quarterly payments due to the HM Revenue & Customs.

The deductions are set against the PAYE & NIC liability of any employees that you may have paid, and if applicable, from any CIS deductions you have made from sub-contractors you use.

These amounts are offset monthly, and are incorporated into the Employers end of year return (form P35) and if there is a balance at the end of the tax year owing to you, you can request it to be refunded to you once the form has been processed.

By Jo Nockels

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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