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

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