What expenses can I claim on my CIS tax return

What expenses can I claim on my CIS tax return? You can all business expenses incurred wholly and exclusively for your trade or profession.

Allowable expenses include:

Cost of goods bought for resale or goods used
Construction industry - payments to subcontractors
Wages, salaries and other staff costs
Car, van and travel expenses
Rent, rates, power and insurance costs
Repairs and maintenance of property and equipment
Phone, fax, stationery and other office costs
Advertising and business entertainment costs
Interest on bank and other loans
Bank, credit card and other financial charges
Irrecoverable debts written off
Accountancy, legal and other professional fees
Depreciation and loss/profit on sale of assets
Other business expense

HMRC guide for CIS subcontractors

Non allowable expenses

The following expenses are not allowable when calculating CIS tax rebates:

mortgage interest on a domestic mortgage
accommodation
travel costs for private travel
home to office or workshop travel
entirely fictitious expenses

Typical expenses allowed for CIS Subcontractors

Mileage allowance for travel between jobs and assignments. However, travel between home and work is not allowable. It is important to note that where mileage allowance is claimed, it prohibits the taxpayer from claiming other vehicle expenses, such as fuel, repairs and maintenance. HMRC scale rates are 45 per mile up to 10,000 miles and 25p per mile for travel over 10,000 miles.
Use of home as office based on HMRC scale rates
Capital allowance for vans and other trade vehicles, as well as small tools
Personal protective equipment (PPE) including boots and hard hats etc.

What happens where you have lost or misplaced your receipts

CIS subcontractors are entitled to a tax-free allowance of £1,000 as an alternative to claiming expenses. In addition, if you have income from property, you are entitled to a further tax-free allowance of £1,000.

Claiming the £1,000 allowance means that you cannot claim any other expenses. Therefore, the tax-free allowance is useful where your total expenses are less than £1,000 or you have lost your receipts. However, you must maintain evidence of your income, such as CIS statements.

Fraudulent CIS Rebate Claims and HMRC Penalties

Unfortunately, some CIS subcontractors and unscrupulous firms engage in inflating CIS tax deductions and expenses, as well as claiming for fictitious expenses without providing any documentary evidence.

A word of warning: HMRC can verify CIS tax deductions for the year by using the subcontractor's UTR to company income and deductions provided on the monthly CIS returns submitted by contractors. Therefore, it's only a matter of time before fraudulent claims are investigated.

Penalties for fraudulent claims are usually double the amount of the claim and this may lead to bankruptcy where the investigation goes back several years.