CIS Tax
CIS Tax is a very important part of the construction industry in the UK. Many construction companies do not have the proper records to support their billing. This leads to huge financial losses by the construction companies, leading to fines and penalties for the erring contractors. An important part of the construction company records is the accounting records. It helps the Company to understand its expenses and also helps it to plan and manage its future finances better. Hence, it is very important to get these records maintained properly and the best way to do it is by hiring a reliable accounting firm.
Encourage Contractors to Keep Accurate Books
The main aim of the CIS Tax is to encourage contractors to keep accurate books of accounts and pay the appropriate taxes on the income they earn. In general, the contractor is liable only for the national insurance contributions (NIC). If he withholds the NIC from payment, he will be liable for income tax. Every contractor has to be registered under the construction industry scheme and he has to pay the appropriate taxes. Thus, many contractors do not pay the appropriate amount of income tax and this leads to a lot of financial losses for the national insurance contributions (NIC).
Appropriate NIC and Income Tax
The importance of accounting firms while working on construction work is very high. You must register yourself under the contractor’s scheme and then you have to pay the appropriate NIC and income tax. If any contractor is found to be diverting funds from his account, he may be charged with criminal behavior under UK laws. The contractors must register themselves under the UK construction work act and follow all the rules of the UK construction industry scheme.
UK Tax System
While working on a project the cost of materials can go high and this will lead to rising in the overall costs of the project. This is because of the extra work that has to be done by the main contractor and also by the subcontractors. Some important categories of your expenses incurred during the work are salaries to the employees, the cost of tools, insurance, gas, other operating costs, and many others. If you want to claim a maximum possible deduction in the income tax and if you want to avail of maximum tax rebates then you should follow the guidelines set by the UK tax system. The expenses that you can claim for as follows:
Importance of Invoicing
When you were deciding to engage any contractor or subcontractor, you should ensure that you keep all the invoices for every project. This is because when you were collecting the bills from the invoicing firm, you should compare the invoicing terms and conditions and accordingly make deductions. As an intelligent contractor or a construction industry owner you should understand the importance of invoicing because it is used to claim a deduction in the income tax. The invoicing is also used to get the appropriate kind of concession in the construction industry because sometimes, the contractors get shortlisted and there are possibilities that they may not get the concession that they demand.
Understand the Tax Laws of the UK
You should have adequate knowledge about the employment law status of UK tax law so that you can properly understand and take decisions related to your employees’ compensation. As a construction contractor or self-employed individual, you should know the things that are considered as self-employed expenses. As a self-employed individual, you should know that all expenses that you incur for business purposes are deductible under the tax laws of UK tax law status. However, some of the expenses that are not deductible under the tax laws of UK tax laws status are considered as self-employed expenses. As a general rule, the expenses that are not deductible under the tax laws of UK tax laws status can be claimed as a deduction in the income tax.
Deduct Tax on the Income
To save money on the overall construction cost, it is advisable to choose the most suitable Self-Employed Liability Company (SELC) or Self-Employed Business Entrance (SEBI) scheme. Many contractors or self-employed individuals who are looking forward to maximizing their profits and minimizing the tax burden, prefer to go with the SELC scheme or the SEBI scheme. Both of these schemes allow the contractors and self-employed individuals to deduct tax on the income earned through the use of their personal property and assets. Both of these schemes provide tax relief on the income of the contractor or self-employed individual and on the income and assets of the company that he works for.
Self-Employed Vata Benefit
A self-employed individual also has the option of opting for the Voluntary Self-Employment Benefit (VSEA) scheme. If an individual works in a job for which he is paid by the company, he is eligible for this scheme. If he works for himself, he has to pay tax only on the income he earns from his own trade business. He does not have to pay tax on the income he gets from any other source. In the case of the purposes of a voluntary transfer of an employee’s job, the employer has to pay tax only to the extent of the benefit the employee gets from his trade business.
