The UK's 2.3 million construction workers are being encouraged to check that they are not owed money from HMRC as a result of overpaying on their tax or not claiming the flat-rate expenses they are entitled to.
Construction workers, including those working within industries such as plumbing and electrical installations, make up 6% of the UK's economic output. Around half of these workers are designated as contractors or subcontractors under the Construction Industry Scheme (CIS).
Tax preparation specialist David Redfern explained: "The CIS was introduced as a way for HMRC to ensure full tax visibility for the construction industry's workers and means that subcontractors are taxed 20% of their earnings at source prior to receiving their earnings.
"However, because of the nature of their employment status, they are considered to be self-employed and therefore initial taxation does not consider their allowable expenses meaning that most subcontractors are paying more tax than they should be". CIS subcontractors can reclaim this overpaid tax at the end of each year via the tax refund process.
Due to their status as self-employed workers, CIS subcontractors are entitled to deduct an extensive range of work-related expenses as tax relief.
These expenses include any tools, equipment or materials they have invested in as well as the costs of any work-based travel or overnight accommodation incurred as a result of their employment.
Redfern stated: "Not only can CIS subcontractors claim allowable expenses as tax relief on their equipment and travel costs, but there is also a range of hidden expenses which can be claimed as tax relief and can add up to a substantial sum when totalled over a tax year, even more when backdated. These expenses can include the costs of running a home office, any insurances or professional subscriptions which are required in order to complete your job and expenses related to banking, loan insurance and other professional fees such as accountancy or legal fees, providing they are related to their employment".
Subcontractors must ensure that the expenses were incurred wholly and exclusively as a result of their employment, as per HMRC regulations. Evidence that the expense has been incurred, in the form of receipts or invoices, will be required.
Construction workers who are not members of the Construction Industry Scheme but are taxed through PAYE instead are not entitled to claim such a wide range of allowable expenses. This is because their employment status is that of employee rather than self-employed subcontractor.
However, there are still areas where PAYE construction workers are missing out on valuable tax relief.
Redfern explained: "Though PAYE employees have fewer options for tax relief, there are still a few areas which are often overlooked by construction workers - for example, where they are required to replace or repair essential items of equipment or tools and do so at their own expense, these costs should not be borne by the worker and can be claimed as a tax refund. Similarly, where the worker is expected to foot the bill for their working away from home expenses and are not reimbursed by their employer, these expenses can be claimed as tax relief."
As with workers working within the CIS, any tax relief claims must be supported with evidence of an actual cost to the employee and must have been incurred solely as a result of their employment.