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.

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To combat what is perceived as ‘false self employment’ in the construction industry the government is consulting on proposed changes to the CIS rules in an attempt to recover an estimated annual loss of £350 million in tax and national insurance contributions.

With a due consultation date of 12 October 2009, it remains unclear whether the proposal could become legislation in time for the start of the tax year 20010/11 – but this is still an unknown.

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This article considers the common penalties that businesses and employers may face in connection with subcontracting and payroll operations.

In some instances, there are grounds for reduced penalties on the basis of ‘reasonable excuse’ but this is complex and beyond the scope of this article.

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