Analysis by accountancy firm Brian Alfred, which specialises in filing returns for CIS construction workers, suggests that self-employed construction rebates are around 17% higher than before the covid pandemic.
The average tax rebate for people registered on the Construction Industry Scheme (CIS) was £1,370 in 2020/21 due to a combination of there being less work, so earnings were down, and grants under the self-employment income support scheme (SEISS) counting as taxable income by HMRC.
For the year to end of March 2022, the average rebate owed is more than £1,600, the firm says, with 90% of Brian Alfred clients set for rebates compared to just 69% last year.
That £1600 is about par for the course, in a normal year. For the 2018/19 and 2019/20 tax years – before covid working restrictions and support schemes came along – the average rebate amount was £1,590 for those eligible for one.
The majority of self-employed construction workers in the UK are CIS registered, which means deductions of 20% to their earnings are made at source. This money is then passed onto the taxman to count as payment towards income tax and National Insurance contributions.
These workers must then submit an annual self-assessment declaring all earnings and expenses, and this often results in a tax rebate being paid back to them.
Brian Alfred’s senior tax manager, Stephen Chapman, said: "We're optimistic about the figures we've seen so far in relation to the rebate positions of the CIS-registered workers we support.
"We've already processed hundreds of self-assessment forms and the data shows a clear increase from the average figures from the 2020/21 tax year, when we really saw the impact of covid on the construction sector and self-employed workers within it. This suggests that the sector is returning to the kind of levels of activity we saw before covid arrived. We will continue to monitor these figures as the year progresses but it's encouraging to see the numbers so far, and we hope the trend continues."
Although some workers did receive a rebate in the 2020/21 financial year, there were others who received nothing at all, and in some cases owed money to HMRC due to the impact of the government SEISS grants. Any money claimed through the various SEISS grants were classed as taxable income by HMRC, which saw many of those who typically expect a tax rebate at the end of the financial year instead faced with a surprise tax bill.
Stephen Chapman added: "Those that received a SEISS grant in the 2020/2021 tax year will have seen the erosion of rebates – or a tax bill that would not normally be expected. This was compounded by the fact that expenses were likely to be much lower due to less work taking place throughout lockdowns.”
Got a story? Email news@theconstructionindex.co.uk
