tax return balls up.

drakeuk

hi guys, just after some advice with regards to my tax return, first of all i am self employed in the construction industry and therefore am on the CIS scheme so my tax is payed automatically. i recieved a letter a few weeks ago from a compliance officer with regards to my last years tax return, they say that my figures are inaccurate compared to the figures they were sent by my contractors. there was a £2 difference in my income, but a £1000 difference in the amount of tax i had payed, after reading through the stuff they sent me and looking at my calculations for that year i realised where the mistake was, you see i have 2 more deductions on my earnings, the first is CITB which is charged at 1.5% and the second is retention which is charged at 2.5%. this is where the extra £1000 came from, i put this on with the tax, so i call them and explained this,
then i recieved my revision which says i now owe them £900. but they have completely disregarded these 2 deductions, so i called them and asked them about it and they said that i cant put these deductions down, this doesnt sound right to me, i try to avoid conflict so any help would be appreciated.

ukric

What precisely are the CITB and retention deductions for? Who did you speak to about showing these deductions on the return? Are they shown on the return anywhere else? I expect they would be some sort of self employment expense, in which case my advice would be to call the tax office and speak to a technician about self employment expenses to see if they can be claimed as an expense on the self employment page, if they are currently not anywhere else on the return.

drakeuk

hi, thanks for the reply, CITB is a kind of training levy which is for the construction industry and retention is money which is held back incase we mess a job up to cover costs of returning to it, if all is ok i get some back but not all, last year i paid £638 and got £160 back which i including in my income. i asked the compliance officer where she put these figures after taking them off the tax figure and she said nowhere as it cant go nowhere. this aint right, its a £1000 of my money that i dont see and they want me to pay tax on. will take you advice and see what i can find out, will keep you updated, thanks again.

sarflee

It appears, from what you have said, that you included the £1000 as tax aready paid via deductions from your CIS payments, when in fact it was more like expenses incurred.

The first would be taken into account in full against any total liability for the year, however latter would reduce your total liability by either 10, 20 or 40%, of the expense, depending on the rate of tax you pay. Basically, if they do include the expense - if not already included - this would reduce your tax bill by a maximum £400 or a minimum £100.

jimmo

Using your figure of 1.5% for CITB and 2.5% for retentions then for every £1,000 that you earn your contractor will deduct
£15 CITB
£25 retentions
and will pay you £960 (less tax)
It is this £960 that should appear as the gross amount for tax purposes on your certificates and if HMRC have amended your assessment in line with the contractor‘s records they believe that the CITB and retentions have already been accounted for and do not need to be allowed again..
If your contractor has declared £1,000 and deducted tax accordingly then I am afraid that it is the contractor who is wrong, not your Tax Office.
Check your figures very carefully.
Take a look here http://www.hmrc.gov.uk/manuals/cisrmanual/CISR15110.htm
And here
http://www.hmrc.gov.uk/manuals/cisrmanual/CISR15040.htm