One of the standard features of construction professionals is that they generally have tax deducted from their invoices at source in the form of CIS
This is similar to employees having tax deducted at source through payroll. The deduction is used to offset any tax owed by the business/individual.
If you’re a self-employed construction professional this is quite straight forward. The CIS deducted from your invoices goes into the same tax pot as the tax and class 4 national insurance which will be owed through your self-assessment tax return.
Any surplus is automatically returned to you when you file your tax return – a good reason to get this done quickly.
The process is not as straight forward if you run a limited company for your construction business. The CIS deducted from your company invoices doesn’t go into the same pot as your corporation tax, it actually goes into your PAYE tax pot.
Since it’s in a different pot, HMRC won’t automatically offset this money against your corporation tax bill. This requires an intervention by you or your accountant to have the CIS moved into the correct pot. Alternatively, if cashflow is an issue, then you can request a repayment of any balance of CIS (after payroll taxes) owing to your business. HMRC has promised to process CIS repayments within 25 days.