Tax credits, CIS and capital allowances

GinnyBee Registered, Tutor Posts: 131 ? ? ?
Need to check with an someone who really knows their tax credits forms. Warning I might go on a little here as my head is spinning!! Please stick with this, I'm having one of "those" days!!!! :confused1:

A client has asked me to get the figures for him (which he will then fill in and submit). His tax return for the last tax tear has not yet been completed and this is a tax credits renewal but his business has changed a bit this year.

He is now under the CIS scheme having not been previously (he's a joiner now working on a building site). For his tax return his income is gross and the tax paid via CIS taken off the tax due per the return, (ie he's paying his tax as he goes along and there could be a balance to pay). This means that the profit which will go on the tax return is NOT netted off for the tax paid as this is dealt with in another part of the return -

...So does this mean his income for the tax credits form seems higher than it is? I am correct in thinking I use the figure which would be profit on the accounts aren't I??? (the figure which does not account for the CIS tax already being paid)

Does this mean he will get a lower tax credit amount? He's going to wonder if he is missing out.

On a slightly separate note, he has also purchased a machine to "reduce his profit" but this will go on the B/S and get AIA on it. This does not come into the tax credits calculation either.

Okay, I'm going to get a large coffee or have a nap then see if I've got this all sorted for myself, if I have I'll post here, otherwise assume my head is still fuddled!


  • peaman
    peaman Registered Posts: 123 ? ? ?
    The self employed income figure for the tax credit form is the assessable profit (net profit less capital allowances) less any pension contributions made.

    It doesn't make any difference if he is being taxed under CIS.
  • GinnyBee
    GinnyBee Registered, Tutor Posts: 131 ? ? ?
    That's exactly what I thought thanks! Can you tell I'm having a bad day?
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