With the Chancellor’s Autumn Statement highlighting the need to manage inflation and rising costs, maintaining compliance with tax laws is more important than ever for all construction businesses, no matter what their size. With that in mind, Indigo Group, which helps companies engage with their workers, grow their businesses and protect them against risk, is encouraging contractors to plan well ahead for their 2024 tax liabilities.
“Keeping abreast of your tax obligations is not just good practice, it’s a fundamental aspect of ensuring the seamless operation of your construction business,” explains Kevin Thomas, Strategy Director at Indigo Group. “From self-assessment to VAT, Corporation Tax and the all-important Construction Industry Scheme (CIS), it is so important to plan ahead, know what you’re dealing with and get support if you don’t.”
The timely reminder comes as HMRC publishes its latest information on those firms that have been charged for deliberate defaults on tax of more than £25,0001. The fines meted out to these companies, many of whom are in the construction industry, are eye-watering and serve as a reminder of what can go wrong.
2024’s key tax milestones
Indigo Group has compiled a quick guide to the key tax dates and posted further resources for contractors and their sub-contractors on the company’s website:
Self-Assessment
As the 2024 tax year unfolds, self-assessment remains a crucial milestone for individuals, including those within the construction sector who operate as sole traders or in partnerships. The deadline for filing self-assessment tax returns for the 22/23 financial year is set for 31 January 2024. Being punctual in meeting this obligation is not just a matter of compliance, it ensures that you avoid penalties and maintain a smooth financial workflow.
VAT
For construction businesses registered for Value Added Tax (VAT), staying on top of submission deadlines is paramount. Quarterly VAT returns for the first quarter of 2024 are due by 7 May 2024. As of 1 January 2023, the government issued penalty points for late returns – one penalty point per missed deadline. If you reach a set number, you will be issued a £200 fine.
It is now more than two years since the VAT Domestic Reverse Charge (DRC in short) was introduced into the construction industry in March 2021. The DRC is a way the UK government handles VAT in the construction industry to prevent fraud. Instead of a builder, for example, charging VAT on their bill, the responsibility shifts to the customer. If both the builder and customer are VAT registered, the customer pays the VAT directly to the government. This change helps improve tax collection. The DRC applies to various construction services, like building, repairing or installing systems. It is essential for construction businesses to understand and follow these rules to avoid issues with VAT and ensure they comply with the law.
There are some exceptions to the reverse charge, including supplies to end-users and supplies of certain professional services, such as architects’ services. Indigo Group has put together a handy flowchart that explains more: https://www.indigogroupservices.com/news/a-guide-to-the-vat-domestic-reverse-charge-in-the-construction-industry/
Corporation Tax
There are different deadlines for Corporation Tax. The deadline for your tax return is 12 months after the end of the accounting period it covers. Do not miss this deadline – you will have to pay a penalty for late filing if you do. The deadline to pay your Corporation Tax bill is usually nine months and one day after the end of the accounting period. Don’t forget, starting in April 2023, Corporation Tax went up to 25% for companies making over £250,000 in profits. If your business makes less than £50,000 in profits, you will still pay the old rate of 19%. If your profits fall in between, there’s a tapering system, making the rules a bit more complex.
Construction Industry Scheme (CIS)
The Construction Industry Scheme (CIS) holds particular significance for both contractors and subcontractors within the construction sector. This scheme was instituted to regulate payments between contractors and subcontractors, ensuring that taxes are appropriately deducted at source. Subcontractors play a big role in the construction industry, bringing specific skills and flexibility to projects. But, handling subcontractors can be challenging without the right support.
Indigo Group’s Contract service addresses this challenge head-on, enabling contractors to engage subcontractors safely, legally and in full compliance with CIS regulations. With Indigo’s expertise, contractors can easily navigate the intricacies of CIS, ensuring that payments are processed correctly, taxes are deducted as required and both parties are protected against potential pitfalls.
“Managing your tax liabilities does not have to be a hassle, especially when it comes to CIS,” says Kevin. “Planning ahead can mean that if you need support, then CIS experts such as the Indigo Group can help in a safe, legal and effective way.”
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