One of the first things to point out is that just because is a rebate is paid, it doesn't mean your return has been checked and that everything is okay. HMRC cannot physically check all returns before issuing a repayment, so they pay first and check later! However, do remember that they have 6 years to complete their checks, and can open an investigation in to your return at any point during this time if they feel the need to do so.
Another thing to remember is that any amount owed to HMRC is an amount owed to the Crown. This means that the standard Statute of Limitations does not apply, and any amount you owe will not just go away after 6 years. It will remain with you forever, and the next time you are entitled to any money from HMRC they will always collect what's owed first. It's not uncommon for a debt that's over 20 years old to be collected.
The lower your net profit, the lower the amount you can borrow. Whilst this may not be of great importance to you now, it's also worth remembering that a mortgage lender will ask for three years of accounts and decide based upon three years' worth of net profits.
In all cases, getting a £3000 rebate is only possible by one of three ways: either you have entered an extremely large amount of expenses, the income/tax deductions figures are listed incorrectly, or the Class 4 NI exemption box is ticked.
Learn more about knowing what's on your return.
You shouldn’t be doing any of the above!
Lets tackle the last issue first, Class 4 National Insurance exemption: whilst ticking this box would add a hefty chunk on to your rebate, it is something that HMRC check every year, and is always reviewed. There are very few people that are exempt from Class 4 NI, if you work in construction you are not one of those people.
When listing your job title as a construction trade and having income that is reported on CIS300 returns it is very easy for HMRC to quickly identify this is wrong, at which point they will send you a letter asking for the amount to be repaid plus interest and possibly penalties. Learn more about what CIS is.
Income/tax deductions listed wrong: if you report your income lower than it was and enter more tax deductions than there were, this will also generate a larger repayment than your entitled to.
HMRC have a record of all CIS income and tax deductions and do compare their records with your tax return, if an error is spotted they will send you a letter asking for the amount to be repaid plus interest and possibly penalties. Learn more about what CIS is.
Lastly the expenses: the only other way to generate a repayment of that amount is to include a large amount of expenses. Whilst your income/tax and Class 4 NI may well be listed correctly and match when HMRC carry out their initial review, your expenses will certainly stand out.
Whilst this is something they don't already have a record of so don't have anything to compare the figures against, they're not stupid. They know that any CIS subcontractor is likely to have most of his materials provided, they also know someone who lists their income as a labourer and has a yearly income of £15000 has probably not realistically had £10000 in expenses!
This is when HMRC will perform a risk assessment based on a number of predetermined factors at which point the information on your return will likely fall outside of these. This may cause HMRC to contact you and ask to review your records.
If you do incur a large amount of expenditure, then by all means we should make sure your return reflects this, and that you claim the correct amount you're entitled to, although you will need to make sure you have kept satisfactory records and evidence of all the expenditure before any return is submitted. This is common practice, and should be collected by everybody, regardless of the amount you're claiming. Learn more about what you can claim.