CIS Tax - Can I reclaim?

Hamzter

Hi,

I'm a university student and this summer I managed to get myself a 3 month placement with a construction management company, I was informed that I was going to be classed as self employed so I'd pay less tax (which I still don't understand), and so would be taxed under CIS. Due to complications in how I was being paid I was only able to register for CIS in my 6th week, and recieved my UTR 5 weeks later, just as I was finishing work, and as a result I was charged 30% tax, which is pretty steep!

The agency I was working for insisted that I can reclaim pretty much all of that although I'm not convinced, I can't find much at all on it. I won't be doing any more work this tax year, and I've earned a total of about £3000 before tax, am I entitled to a refund like they say I am? If so, when can I reclaim and how do I do it?

fengirl_2

Yes, contact HMRC (with your UTR) and tell them you have now ceased as a contractor and are a student and wish to reclaim your tax now. You will get all your tax back.

System

You can certainly claim back any overpaid tax, however I think you will have to wait until the end of the tax year when you will have to complete a tax return. On the return you will declare your self employed income and any income from any other sources for the period 6th April 2007 to 5th April 2008.

BTW the way the CIS scheme works is that until you have a UTR number a contractor HAS to deduct tax at 30% whether you are a student or not. Once you have a UTR then you give it to the contractor and he has to contact HMRC to verify that you are registered. Once that is confirmed the contractor can then deduct tax at 20%.

This must be what the contractor meant by paying less tax though over the 2007/2008 tax year your tax free allowance would be the same as everyone else under 65 and that is £5225. That is the figure that will be used when HMRC get your tax return and calculate your tax liability for the whole year and whether you are due a rebate.

Hoddie_2

I believe you can claim an in-year repayment of CIS deductions providing your accounting year has ended (which it will have if your self-employment has ceased). I think the form is CIS40 but check with your tax office for clarification.

thehoodedclaw2008

Definitely one to keep on top of - HMRC seems to be walloping ppl who don't file their returns on time with no exceptions. Just seen that taxman has milked CIS for £180m in fines so far!!!:

http://www.contractjournal.com/Articles/2008/11/05/61868/cis-tax-fines-hit-180m.html

But if about a quarter of a million people have appealed and 185k had it upheld, I make that an uphold rate of about 80%. Hardly looks like they are taking great pains to check before they dish out the penalty.

Bean_Counter

Hamzter wrote: »

I was informed that I was going to be classed as self employed so I'd pay less tax

I'll admit I do not know any of your circumstances, but I am willing to bet that HMRC would not think of you as a sub-contractor under the CIS scheme. I guess that the employer wanted to call you a subbie so that it meant less costs for them (no employers NI, holiday pay, sick pay, B&CE contributions etc.)

For future reference, you should have a look at this link.

Having said all that you should still get your tax back as the onus is on the employer to get the employment status correct.