CIS refund calculator

Six months into the tax year have you thought about the amount of your CIS refund? If so, then my refund estimator for 2009/10 may help.

With the usual health and safety warning applicable, here are the assumptions on which the estimator is based along with an explanation on how to use it.

  • The figures do not reflect a mark up on materials billed to contractors and assumes all labour is charged under the CIS.
  • Trading profit is therefore only derived from the billed labour.
  • I have taken total billed labour as equal to taxable profit, which therefore excludes the effect of tax relief on newly purchased and pre-owned fixed assets.
  • I have included four rates of business cost, being 0%, 10%, 15% and 20% of the billed labour, i.e. business cost of £6,000 are 20% of £30,000 of billed labour.

As future events are far from certain and circumstances may change in the remainder of the tax year the results should not be taken to represent the final repayment.

Table estimator

CIS labour provided 10,000 15,000 20,000 25,000 30,000 35,000 40,000
Refund / (liability)
– without further costs 950 550 150 (250) (650) (1,050) (1,450)
– costs of 10% labour 1,150 850 550 250 (50) (350) (650)
– costs of 15% labour 1,250 1,000 750 500 250 0 (250)
– costs of 20% labour 1,350 1,150 950 700 550 350 150

Based on the above, the figures in the table demonstrate that a subcontractor with £20,000 of billed labour and no business costs should receive a refund of £150. Or that the same trader with business costs equal to 10% of labour (i.e. £2,000) will receive a refund of £550.

Of interest is the fact that on the basis of no business costs, a labour charge of £21,900 is the point at which there is neither a refund nor a tax liability.

Step method

It is possible to better estimate a tax refund using the following three step process:

  • Start with the maximum 2009/10 refund available of £1,234 – which is the CIS tax on the first £6,475 of billed labour (equal to the personal tax free allowance).
  • For every £1,000 of extra labour the amount of CIS refund is reduced by £80.
  • For every £1,000 of deductible business costs the CIS refund increases by £200.

To demonstrate, we can take a trader with billed labour of £26,900 and £3,000 of business costs.

Maximum refund (first £6,475 of labour) 1,234
Additional labour (£26,900 – £6,475) x 0.08 (1,634)
Business costs (£3,000 x 0.2) 600
CIS refund 200

Therefore the trader is due a refund of £200 and an extra £200 for every additional £1,000 of business costs.

I hope you find this article useful and let me know if you have any queries.

copyright ©2009

This article is for discussion purposes only and does not represent advice on which you should act without consulting a professional as tax legislation is complex and changes frequently.

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