Construction Industry Scheme Deductions
One of the easiest ways to make savings in your self-assessment tax return is to adjust your estimates made for construction industry scheme deductions. Many construction companies, particularly those located in London, have an on-site professional advisor that can help with this process. The professional advisor's job is to ensure that all employees and subcontractors understand the different construction industry schemes that can be used to offset their income tax liability. There are three main schemes that the professional advisor can help you with - a general self-assessment tax return, a self-employed scheme, and a commercial car tax credit. Each scheme has its own set of regulations that must be followed.
Contractors and Subcontractors
The first scheme is the general self-assessment one. This can be used by contractors and subcontractors that are classified as self-employed. This allows each individual to deduct the cost of any materials or supplies that they buy themselves, as well as any expenses for advertising or promotional activities. These include expenses such as costs associated with obtaining any permits, payments to the Home Office and VAT, among others.
Sub-Contractor Scheme
The second scheme is a sub-contractor scheme. A sub-contractor is an employee who signs an agreement with a qualified professional in order to become a sub-contractor to another person or company. In this case, the individual must designate an employee to act as his representative. With this type of scheme, the supplier or sub-contractor does not have to pay the same rate of tax that he would have had he chosen to be self-employed. However, he still must subtract his expenses from his gross sales figure so that he can calculate his taxable income.
Construction Operations Scheme
The third construction operations scheme that applies to contractors and subcontractors is the business unit expenditure system. This system applies to individuals who engage in construction operations for their personal use and benefit. Contractors and subcontractors are still liable to the tax office for the current value of their expenses when the contract is terminated and the next payment made to a sub-contractor for construction operations undertaken. There is also a new provision which states that if the construction operator begins employment with a new contractor, the contractor and subcontractor must make a similar payment to the new contractor, rather than the regular payment made to the first contractor.
Current Rule
If you are a construction operator, then you may be able to claim expenses for the current value of any work carried out by you in the previous year. However, this is only applicable if you started your business within the current tax year. There is a new clause introduced called the current rule. The current rule states that the contractor and sub-contractor employer should prove that the construction work was carried out at the expense of the company and were wholly performed for the benefit of the company.
Eligible to Claim Deductions
There are other circumstances in which the current rule may be relaxed. The main one is where the construction work is not totally for the benefit of the company. The first two categories above apply to these types of situations. If you are self-employed and are able to prove that you are partly or wholly paid for your work because of the scheme you are claiming under, then you qualify for this deduction. In addition to the two categories above, you may also be eligible to claim deductions for the costs of travel, where the travel expenses relate to a trip to the UK for work purposes. These can include a stay at a hotel, or a meal at a restaurant.
Application for Construction Scheme
Another way in which construction contractors are able to make an application for construction scheme deductions is through the use of a submission to the SSA. A submission is made in the form of a Schedule A to the SSA. In this form, the contractor must provide details about their business and submit relevant receipts, invoices and vouchers. It is important to remember that all these documents are required to be submitted on or before the due date for the SSA to process them. After the submission date, it is too late to claim any of the sub-contractor's or consultant's fees.
Tax Consultant
The third category relates to self-employed contractors and subcontractors. In this case, you will need the services of a tax consultant who will be able to determine which rate of self-employed tax you are liable to pay. A contractor and subcontractor who are liable to pay a higher rate of self-employed tax than the rest of the industry is considered to be an outsourced provider. The consultant will then calculate how much money the contractor should be entitled to. If they find that the contractor is paying too high a rate of tax, they will work with the contractor to try and come to an agreement.