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What’s important to know about tax rebate

Whether you’re a self-employed builder working for contractors, or you’re a business manager leading a team of construction workers, there are things you should know about tax rebates to make sure you or your workforce are getting the money you’re entitled to.

But with differences between entitlements for PAYE workers and those registered with the Construction Industry Scheme (CIS), it’s important to understand what tax claims can be made and what they cover.

Rebates for PAYE and CIS workers

PAYE (pay as you earn) workers, who have their income tax and national insurance deducted from their wages, can claim back tax rebate. CIS is a government tax scheme, created by HMRC, for contractors and subcontractors, designed to reduce tax evasion. Construction workers registered under the CIS can also claim tax relief.

Both PAYE and CIS workers can claim back on expenses for different things, which they need to do their building and construction work, from tools to travel costs. Depending on the expenses incurred, tax rebates can total as much as £1500. Companies like Brian Alfred, can help do this for both PAYE and CIS builders, which ensures that all claims are made correctly and accurately.

Expenses that can be claimed back

There are different expenses where construction workers can claim back tax. These cover six areas: capital expenses; motor vehicle costs; tools, equipment and uniform; travel, mileage and subsidence; builder admin costs; and general or other business. Whether you’re a PAYE worker or you’re registered with the CIS, different rules apply for what expenses can be claimed.

Capital expenses

This is concerned with expenses such as new vehicles, PCs and hand-held devices, like laptops and tablets.

Construction workers under CIS can claim capital expenses, as long as they are purchases specifically for business. This could include a laptop that has been bought to work while travelling to and from a site. PAYE workers, however, can’t claim in this area of expense.

Motor vehicle costs

This covers expenses such as fuel, road tax and car insurance.

PAYE workers can’t claim for these costs. However, CIS-registered workers can, as long as the vehicle is specially for business use. This could include the vehicle costs for a van that’s being used for carrying construction equipment to a building site.

Tools, equipment and uniform

This area of tax rebate involves hiring or purchasing tools, equipment, and protective clothing, as well as uniform laundering.

Workers registered under the CIS, who have purchased or replaced tools to do their work, can claim these as an expense. However, only claims can be made on compulsory protective clothing, if the builder’s uniform is standard or they just wear jeans and a T-shirt to work, for instance. This could include a hard hat or a high-visibility jacket.

If a PAYE worker had to buy or replace tools and equipment because their employer couldn’t provide them or similar items, they can claim back these expenses too.

Travel, mileage and subsidence

This is concerned with the costs of travelling to a site, the number of miles driven, as well as eating and accommodation costs if a builder had to stay there overnight.

Workers with the CIS can claim expenses for travelling to a temporary workplace, which means if the work contract is less than 24 months. PAYE workers at a permanent fixture can’t make claims in this area. However, they can if they’re required to do temporary work at another site.

Builder admin and general business costs

Builder admin involves the remaining expenses that can’t put into one of the above categories. This includes things like phone, stationary and postage costs. General business is concerned with things like public liability insurance, as well as trade union and subscription fees.

While PAYE workers are unlikely to incur building costs here, so are unable to claim, those registered under the CIS can make claims. With general business costs, CIS workers can also make claims, while PAYE workers can claim for anything that has been spent on their profession. This could include trade union fees and magazine subscriptions.

Keeping on top of tax rebates

Making a tax rebate claim involves completing paperwork that list the details and costs of all those expenses incurred. This can be done via HMRC or by contacting a third-party tax rebate company.

For builders to keep on top of their yearly claims, it’s a good idea to file and update evidence of all expenses, such receipts and invoices. It’s wise to also put them into the different key categories, such as travel, tools and general costs. That way, when it comes to filling out your rebate paperwork, the information is ordered and organised to get the process off to a good start.

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Latest Issue

BDC 318 : Jul 2024