CIS Refunds: Claim the Tax You’re Owed

A contractor pays you for a job, but 20% has already been taken off under the Construction Industry Scheme. That deduction is not automatically the final tax you owe. For many subcontractors, CIS refunds are the route to recovering tax that has been overpaid during the year - provided the figures are right and the claim is backed by proper records.

The size of a refund varies. It depends on your total income, business expenses, personal allowance, other earnings and the amount of CIS tax deducted. Some subcontractors receive a worthwhile repayment; others find that they owe further tax once every source of income has been included. The point is to calculate it properly, rather than assuming a deduction statement tells the full story.

Cash being handed to builder

What are CIS refunds?

The Construction Industry Scheme requires contractors to deduct money from labour payments made to many subcontractors. A verified subcontractor will normally have deductions taken at 20%. If they have not been verified, the rate can be 30%. Subcontractors with gross payment status are paid without deductions, but still need to account for their tax through Self Assessment.

For a sole trader, CIS deductions are treated as tax paid in advance. When you submit your Self Assessment tax return, HMRC compares the tax already deducted with your final tax bill for the year. If deductions and any other payments exceed what you owe, the difference can be repaid.

This is why turnover alone does not decide whether you are due money back. A subcontractor may have had substantial deductions taken from invoices but also have valid costs that reduce taxable profit. Equally, someone with deductions may have untaxed income from private work, property, driving or another job that changes the result.

Who can claim a CIS tax refund?

Most CIS repayment claims involve self-employed subcontractors working in construction. This can include trades such as bricklayers, electricians, plumbers, decorators, carpenters, groundworkers and labourers. If you are paid under CIS and have tax deducted from your labour, you may be entitled to a repayment after the end of the tax year.

You must report all relevant income, not only work for contractors. This includes private jobs paid directly to you, any employment income shown on a P60, rental income, bank interest above the relevant allowances and other self-employed work. HMRC expects the return to show the complete position.

If you work through a limited company, the process is different. CIS deductions suffered by the company are generally set against its PAYE liabilities through payroll reporting. Where deductions exceed the company’s PAYE and National Insurance liabilities, a repayment may be due. It is not a personal Self Assessment refund simply because you are the director, so the accounting and payroll records need to be handled carefully.

A deduction is not always proof of a repayment

It is tempting to add up the tax shown on your CIS statements and expect that amount back. In reality, the deduction is a credit against your eventual liability. Your final position is based on taxable profit: income less allowable business expenses, then adjusted for tax allowances and other income.

For example, a subcontractor could have £8,000 deducted during the year. After allowable expenses, their personal allowance and the tax calculation are considered, they may be due a large refund. But if they also earned well from private work without deductions, their refund could be smaller or disappear altogether.

Records that make a claim easier to defend

Your monthly CIS deduction statements are central to the claim. They should show the contractor’s details, your gross payment, the cost of materials where applicable, the tax deducted and the payment date. Keep every statement and check it as you receive it. Chasing missing statements at the end of January is avoidable stress.

It also pays to keep a clear record of every invoice, payment received and business cost. Receipts do not need to live in a carrier bag until year-end. A simple, regularly updated bookkeeping system gives you a far better view of profit and makes it easier to spot a contractor payment that is missing from your records.

Common allowable costs for a genuine subcontractor can include tools and protective clothing, trade insurance, accountancy fees, advertising, mobile phone use, professional subscriptions, vehicle costs for business travel and materials you have paid for yourself. The detail matters. Ordinary clothing, personal travel and costs with no business purpose are not allowable just because you work in a trade.

Vehicle costs are a good example of where the answer depends on your circumstances. You may claim mileage at the approved rate if that suits your method, or claim a proportion of actual running costs. You cannot claim the cost of travelling from home to a regular workplace in the same way as travel between temporary sites. Getting this right protects both your refund and your position if HMRC asks questions later.

How to claim CIS refunds through Self Assessment

For most sole-trader subcontractors, the claim is made as part of an annual Self Assessment tax return. The tax year runs from 6 April to 5 April. Once your income, expenses and CIS deductions have been entered correctly, HMRC calculates whether tax is due or a repayment is available.

The online filing deadline is usually 31 January following the end of the tax year. You can file earlier, which is often sensible if a repayment is due. There is little benefit in waiting until the busiest time of year when you already have complete figures.

Before submitting, reconcile your income against bank statements, invoices and deduction statements. Check that deductions have not been entered twice and that gross amounts have not been confused with net payments received. A simple input error can delay a repayment or lead to a return that needs correcting.

If HMRC accepts the claim, you can normally choose how the repayment is made. Processing times vary, especially where HMRC carries out additional checks. A larger-than-usual repayment, inconsistent figures or missing CIS information can lead to questions, so accuracy is more useful than trying to rush the process.

Do not let an old tax bill surprise you

A refund from the latest year can sometimes be used against outstanding tax, penalties or other HMRC debts. This can be frustrating if you were expecting money in your bank account, but it is better to know the position beforehand. It may also be sensible to review payments on account, particularly if your income has fallen or you have moved from CIS work into a different arrangement.

Mistakes that can reduce or delay a refund

The most frequent problem is incomplete paperwork. Contractors do not always provide deduction statements promptly, and subcontractors can lose them after changing phones, email addresses or sites. Ask for replacements early and make sure the contractor has your correct CIS registration details.

Another issue is claiming expenses that are estimated too generously or cannot be supported. A fair, evidence-based claim is the right approach. HMRC can ask to see records after a return has been submitted, and a refund is not a reason to relax your record-keeping.

Finally, be wary of anyone promising a refund before they have reviewed the full picture. A proper CIS claim considers your records, all income sources and the expenses you are entitled to claim. The right outcome is not always the biggest number on paper - it is the figure you can stand behind.

For subcontractors juggling sites, invoices and the next job, tax administration can easily slip down the list. Short And Sons Accountants helps CIS clients put the records in order, submit accurate returns and claim repayments without guesswork. A well-prepared claim gives you more than the chance of money back: it gives you a clearer view of what your work is really earning.