Top Tax-Deductible Expenses for CIS Subcontractors: Maximise Your Tax Savings
If you are a self-employed subcontractor working under the Construction Industry Scheme (CIS), understanding what expenses you can claim is crucial to reducing your tax bill and maximising your profits.
Many CIS workers end up overpaying tax simply because they are unaware of the legitimate business expenses they are entitled to claim.
In this blog, we will guide you through the most common tax-deductible expenses for CIS subcontractors, helping you to keep more money in your pocket.
Understanding the “Wholly, Exclusively, and Necessarily” Concept
To claim an expense as tax-deductible, it must meet HMRC’s criteria of being wholly, exclusively, and necessarily for business purposes:
• Wholly: The expense must be entirely for business purposes, with no personal use.
• Exclusively: The expense must be solely for business and not shared with personal expenses.
• Necessarily: The expense must be essential for running your business.
For example, purchasing tools specifically for a construction project would meet these criteria, while buying clothing that you also wear outside of work would not.
What Expenses Can You Claim as a CIS Subcontractor?
1.Tools and Equipment
• Purchase or hire of tools and machinery: If you buy a power drill or hire scaffolding for a project, these costs are fully deductible.
• Repair and maintenance costs: If your equipment, such as a cement mixer, breaks down and needs repairs, the cost can be claimed.
• Safety gear and protective clothing: Items like steel-toe boots, high-visibility vests, helmets, and gloves are essential for site work and qualify as deductible expenses.
2.Materials and Supplies
• Building materials: Purchasing bricks, cement, timber, or plasterboard for a project.
• Consumables like nails, screws, and adhesives: Small items that are regularly used up during construction work.
3.Vehicle and Travel Costs
• Fuel and mileage expenses: If you travel to different construction sites, you can claim the mileage or fuel costs.
• Vehicle insurance (if used for business): A van or pickup truck used solely for transporting tools and materials.
• Repairs, servicing, and road tax: Keeping your vehicle in working order for business purposes.
• Parking fees and toll charges: Paid while attending a construction site or meeting with clients.
For CIS subcontractors, tracking vehicle costs can be complicated.Fortunately, HMRC offers a simplified expenses scheme for vehicle costs, making it easier to calculate and claim deductions without needing to keep detailed records.
Vehicle Simplified Expenses
For vehicles, if you use your vehicle for business purposes (e.g.driving to construction sites), you can claim a flat rate for vehicle expenses based on the number of miles driven for business purposes.
• Car or van: £0.45 per mile for the first 10,000 miles and £0.25 for each additional mile.
• Motorcycle: £0.24 per mile.
• Bicycle: £0.20 per mile.
This eliminates the need to track individual costs for fuel, insurance, repairs, and servicing. If you use your vehicle for both personal and business purposes, you can only claim for the business miles driven.
4.Home Office Expenses
If you manage your business from home, you can claim a portion of:
• Rent or mortgage interest: If you have a dedicated workspace for handling invoices and paperwork.
• Utility bills (electricity, heating): A percentage based on the space used for business purposes.
• Internet and phone bills: Calls made to suppliers or clients and internet usage for business-related tasks.
For CIS subcontractors, tracking home office costs can be complicated. Fortunately, HMRC offers a simplified expenses scheme for home office, making it easier to calculate and claim deductions without needing to keep detailed records.
Home Office Simplified Expenses
Under the simplified expenses scheme, if you work from home, you can claim a flat rate for home office expenses based on the number of hours you work from home each week. This removes the need to calculate exact costs for rent, utilities, and internet usage.
•For 25 to 50 hours worked from home per month, you can claim £10 per month.
•For 51 to 100 hours worked per month, you can claim £18 per month.
•For 101 hours or more worked per month, you can claim £26 per month.
This approach is straightforward and ensures you’re not over- or under-claiming your home office expenses. However, if you have a dedicated office space and can prove the actual costs (rent, utilities, etc.), you can choose to claim based on the actual expenses instead of using the flat rate.
Other Tax-Deductible Expenses
5.Professional Services
• Accountant or bookkeeper fees: For managing your CIS deductions and filing yourSelf-Assessment tax return.
• Business-related legal advice: For handling contracts or disputes with contractors.
6.Insurance Costs
• Public liability insurance: Protects you against claims from third parties for injury or damage caused on-site.
• Professional indemnity insurance: Covers mistakes or errors in your work.
• Tool insurance: Protects against theft or damage to your tools.
7.Training and Certifications
• Health and safety courses: Required to meet site safety standards.
• CSCS card costs: Necessary to prove your skills and qualifications.
• First aid training: To meet site regulations and ensure a safe working environment.
8.Advertising and Marketing
• Business cards and flyers: To promote your services to potential clients.
• Website development and hosting fees: For creating an online presence and attracting more clients.
9.Bank and Finance Charges
• Business bank account fees: For managing business transactions.
• Interest on business loans: If you borrowed money to invest in tools or equipment.
CIS Deductions
• You can reclaim the tax already deducted by the contractor under CIS when you file yourSelf-Assessment tax return against your tax liability.
What Expenses You Cannot Claim
❌ Personal clothing
❌ Private vehicle use
❌ Personal meals (unless part of business travel)
Importance of Record Keeping and Evidence for HMRC ComplianceChecks
HMRC may conduct compliance checks to ensure your tax return is accurate. To protect yourself and avoid penalties, it is essential to keep detailed records of your income and expenses. This includes:
• Invoices and receipts for purchases.
• Bank statements and business account records.
• Mileage logs and travel expenses.
• Proof of CIS deductions.
• Contracts and agreements with clients.
Keeping accurate and organised records for at least six years after the tax year ends will help you provide evidence if HMRC requests it.
Why Is It Important to Track Your Expenses?
Keeping a record of your expenses throughout the year will not only help you reduce your tax bill but also ensure that you can claim back any CIS tax deductions you’ve already paid.
How We Can Help You
At 1to1 accountants, we specialise in helping CIS subcontractors:
• Claim back CIS tax deductions
• Maximise tax savings
• File your Self-Assessment tax return correctly
• Stay fully compliant with HMRC
For expert assistance with your self-assessment tax return, feel free to contact us today!
