If you are a contractor in the Construction Industry Scheme (CIS), since April 2006 you have been required to complete a monthly return to HM Revenue & Customs confirming amounts paid to subcontractors and amounts of tax withheld if applicable.

If tax is to be deducted you must remember to calculate it correctly – apply the rate of deduction against the payment net of VAT and any materials charged for by the subcontractor.  

Instead of issuing CIS vouchers, a monthly statement should be given to each of the subcontractors instead, clarifying your CIS details, the subcontractors CIS details and payment information.

All returns must be submitted either by post or online by the 19th of the month.  If any deductions have been made from the subcontractors, these must also be made by the 19th of the relevant month in order to avoid interest charges and penalties being incurred.

If you need any assistance with monthly returns or other CIS queries, please contact janice@a4gsolutions.co.uk or alternatively speak to your client manager.

Alastair Darling has announced last week that the personal allowance for 2008/09 will be increased by £600 to £6,035 with retrospective effect from 6th April 2008 in order to compensate lower earners for the abolition of the 10% tax band in the last budget, effectively giving away £120 per basic rate tax payer.

The basic rate tax band has also been decreased by £1,200 to £34,800 in order that higher rate tax payers do not also benefit from the decrease, although this should mean that individuals within the higher rate band will so no difference to their tax bills.

For the majority of SME owner-managers running their own limited companies, the most tax efficient way of remunerating themselves remains a small salary of c.£5,400 per annum, with dividends taken thereafter, although it should be noted that higher rate tax will kick in on dividends if your total drawings from the limited company exceed c.£37,290 (ignoring any other forms of income).

If you are in the position of paying higher rate tax on dividends and wish to reduce your tax liabilities, it may mean that your business structure is not as tax efficient as it could be. Please contact wes@a4gsolutions.co.uk to find out more.

"Dreams have their place in managerial activity, but they need to be kept severely under control."

Lord Weinstock