I've just done a tax calculation for a CIS bod and he's unhappy with the amount of the refund, as he usually gets quite a bit more. However he's with a different contractor now who pay him mileage, which is why I believe there's been a reduction.
As it's the first time I've done CIS where they've been paid mileage I just want to double check my figures.
Gross income £26090 This includes mileage paid at 35p a mile totalling £5761. On the deduction sheets the mileage amount is showing as Materials, so CIS tax hasn't been deducted on that bit.
My calculations are as follows
Income £26090
expenses mileage £6115
other expenses £432
Profit £19543
I could do it the other way at Income £20329 but then the mileage expenses would only be £354 so I end up at the same profit.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Is your expenses mileage figure of £6,115 the combination of materials and mileage shown on the CIS Payment Certificates that has not been subject to CIS deductions? Is other expenses his general operating costs as a self employed person? Meaning he would have been subject to £3,995 in CIS deductions which he is offsetting against his tax bill on his profit of £19,543?
Its a bit of a dodgy area though as I'm fairly sure that somewhere in the depths of the CIS guide is something that says mileage, travel expenses and subsistence must be included in the gross amount from which CIS deductions should be made. Putting it down as materials is a bit naughty.
-- Edited by pictures on Wednesday 10th of May 2017 09:15:37 AM
Agree with Julie, I remember seeing that mileage is something which should also have CIS deducted although I'll be damned if I can find any evidence of it now!
This internal manual from HMRC sort of skims over it in the first paragraph www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr15080 "Where a construction contract places an obligation upon a contractor to pay a subcontractors expenses (such as travel, subsistence and accommodation expenses) such payments form part of the overall value of the contract. As such they will result in a deduction under the Scheme."
To be fair though, that's not the fault of John's client but of the Main Contractor he is working for.
I found it in a roundabout way on the HMRC website. In a list of things which should not have CIS deducted paraphrased it said Fuel (but not fuel used for travelling)
Main contractors do it though because they think they are being nice to the subbie and helping his cashflow.
Is your expenses mileage figure of £6,115 the combination of materials and mileage shown on the CIS Payment Certificates that has not been subject to CIS deductions? Is other expenses his general operating costs as a self employed person? Meaning he would have been subject to £3,995 in CIS deductions which he is offsetting against his tax bill on his profit of £19,543?
Its a bit of a dodgy area though as I'm fairly sure that somewhere in the depths of the CIS guide is something that says mileage, travel expenses and subsistence must be included in the gross amount from which CIS deductions should be made. Putting it down as materials is a bit naughty.
-- Edited by pictures on Wednesday 10th of May 2017 09:15:37 AM
No materials, simply mileage. So am I right in treating the top line as the gross income, deducting mileage of £6115, the rest are just general expenses (inc my fee) (1)
I hear what you say about it being naughty, and I only found out it was mileage when I asked the subby. Looking at the link Fin? gave, I would say it should have been subject to CIS deduction.
It doesn't affect tax though does it, because had he been taxed on the whole amount, he would have paid more upfront tax but get it back in the rebate, so the nett result will be the same.
(1) The mileage paid by the contractor is £5761, which at 35p a mile equates to 16460 miles 10000 miles @ 45p a mile comes to £4500 + 6460 miles @ 25p a mile comes to £1615 hence my figure of £6115 mileage.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I've just done a tax calculation for a CIS bod and he's unhappy with the amount of the refund, as he usually gets quite a bit more. However he's with a different contractor now who pay him mileage, which is why I believe there's been a reduction.
Hi John
Just wanted to find out on where you say he is unhappy as he usually gets more, there could be a number of factors which means his rebate is less but if as you think its because of the mileage payment would he not be better off sticking to claiming the same motor expenses as last year (I take it that it was not mileage allowance) and to see if that is more beneficial
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
I'm assuming that the rebate is less because he is actually being paid more by the contractor as they are giving him the 35p per mile that his previous contractor was not.
Sorry I misunderstood, I thought that that the turnover was roughly the same as before and that was why he was unhappy and that the contractor had paid the mileage so as the subbie did not get taxed on it (which as you say is not classed as materials)
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Last year he claimed £5900 in mileage on a turnover of approx 20k, but paid for his own fuel. This year his turnover was about the same, but he received an addition £5760 odd from the employer that he never paid tax on. It stands to reason that his tax rebate is going to be considerably less but he had it in his head that it was going to be the same. All sorted now thanks he accepted my explanation in the end.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I'm assuming that the rebate is less because he is actually being paid more by the contractor as they are giving him the 35p per mile that his previous contractor was not.
Yep, it took some explaining but he understood in the end
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
