Are you due a Tax Rebate?
It is a well-known fact that every year thousands of people fail to reclaim overpaid tax. This may be due to not knowing what you’re entitled to, not knowing the procedure, not having accurate records or not having a good accountant.
Tax Rebates are normally due for a variety of reasons. In construction, very often tax is deducted at source by contractors or employers, and this likely generates an overpayment of tax on your Self Assessment account or Corporation Tax account. However, other taxpayers also may be entitled to a tax rebate. This may be due to the wrong operation of the tax code or other reliefs. In some cases people do not realise that they have the circumstances perhaps due to good investment decisions, to claim a tax rebate. If in doubt, we will be happy to help.
Here are three common situations:
Tax Rebates for the Self Employed
You are self-employed and have had tax deducted at source by the Contractor, usually at 20% under CIS. Whilst CIS Tax is deducted from your income, the tax assessment is made on your net profit. The assessment not only includes income tax at 20% but also class 4 National Insurance at the current rate. If your expenses are substantial then the tax deducted at source is more than the tax due, which as I have said is calculated on your profit, hence you are entitled to a tax rebate.
What can you do to claim your tax refund? It is important to realise that under the rules of Self Assessment you need to keep accurate records. Without accurate records, should there be an enquiry, HM Revenue & Customs will restrict the amount of expenses you can claim and they may issue penalties if you are unable to substantiate your claim. Therefore it is vital that you speak to us before completing a tax return. We will be able to assist ensuring that you will receive the highest rebate to which you are entitled, but in full compliance with HMRC rules.
Tax Rebates When Employed on PAYE
Construction workers on PAYE can also claim for their travel expenses. This is based on mileage if you drive your own vehicle, on the cost of public transport and other business expenses you may incur on behalf of your employer.
A few years ago HMRC recognised that a lot of construction workers who work on PAYE do not have a permanent place of employment. Hence if they incur costs they can make a claim for expenses that qualify. This works very much on the same principle illustrated above for those who are self-employed. Expenses effectively reduce your salary and therefore the tax you paid is too much and you are due a tax rebate. The rules can be complex, but we can help you to ensure:
- you qualify
- you get the highest rebate, we have been successful in hundreds of cases.
Please be aware that where the tax code has been changed to refund the tax on a weekly basis through your pay cheque, you may not have a tax rebate at the end of the tax year and in some cases you may actually owe tax. This is why it is not a good idea to have your tax code changed
Tax Rebates for Limited Companies
If you have a limited company which is subject to the CIS scheme, chances are your limited company is due a tax refund. This can be very substantial because strictly speaking companies pay corporation tax and not income tax. What this means is that if your company does not engage sub-contractors, the tax deduced under CIS will be refunded in full. As you can appreciate this equates to thousands of pounds. If the company has used sub-contractors then the tax rebate will be reduced by the amount of tax deducted from sub-contractors.
As a general rule the tax refund will need to be used to pay for the corporation tax, but in our experience only half of the tax rebate will be used for this purpose, the other half will be available as a dividend or to be plowed back in the business.
A tax rebate is not a present. You have worked for it and it is your money. However, you must claim it, HMRC will not refund it automatically. But, it is always a great feeling when you get it and it is a great feeling for us also, knowing that we have done a good job for you.
Do you need assistance in ensuring you get your tax refund, or know someone who needs assistance? Please contact us using the details below and let me explain how I can help you today.