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How to Claim a CIS Refund, A Step-by-Step Guide for UK Subcontractors
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CIS Tax Refund Guide for Subcontractors: How to Claim Back Overpaid Tax
If you are a subcontractor working in the UK under the Construction Industry Scheme (CIS), you may have paid more tax than you actually owe and could be entitled to a CIS tax refund.
Many subcontractors, including plumbers, electricians, painters, builders and construction workers, often overpay tax through CIS deductions during the year. Understanding how CIS works and how to claim back any overpaid tax can help improve your cash flow and ensure you do not leave money with HMRC unnecessarily.
What is CIS and who does it apply to?
The Construction Industry Scheme (CIS) is a tax system used by HMRC for construction work. Under CIS, contractors deduct tax from payments made to subcontractors and pay this directly to HMRC on the subcontractor’s behalf.
This system applies to various business structures including:
- Sole traders
- Partnerships
- Limited companies
HMRC has clearly defined what falls under construction work. Some common examples include:
Decoration work
Painters and decorators working for contractors will normally fall within CIS rules.
Installing systems for heating, lighting, power, water and ventilation
This includes trades such as:
- Plumbers
- Electricians
- Heating engineers
- Ventilation specialists
Cleaning after construction work
Cleaning the inside of a building after construction work has been completed can also fall within CIS.
Many tradespeople do not realise that they may fall within CIS until deductions begin appearing on payments received from contractors.
What is CIS and how are CIS deductions made?
CIS operates as a “pay as you go” tax system.
When a subcontractor invoices a contractor, the contractor deducts a percentage from the payment before releasing the remaining amount to the subcontractor. The deducted amount is then paid directly to HMRC.
These deductions are effectively advance payments towards the subcontractor’s future tax bill.
CIS deduction rates
The amount deducted depends on your registration status with HMRC.
CIS Registered Subcontractor
- 20%
Not Registered for CIS
- 30%
Gross Payment Status
- 0%
Having Gross Payment Status means payments can be received in full without deductions, although eligibility requirements must be met.
Information you must provide to the contractor
Before a contractor can verify your status with HMRC, you will usually need to provide:
For sole traders and partners:
- Unique Taxpayer Reference (UTR)
- National Insurance number
For limited companies:
- Unique Taxpayer Reference (UTR)
- Company registration number
Providing accurate information helps avoid being placed on the higher 30% CIS deduction rate.
How CIS deductions are calculated
Contractors do not necessarily apply CIS to the full invoice amount.
Before calculating CIS, certain costs can usually be removed from the gross amount:
- VAT
- Cost of consumable items
- Machine hire costs (machine only, not operator costs)
- Fuel used directly in construction work (excluding travel fuel)
- Materials purchased by the subcontractor
Contractors may request invoices or supporting evidence for materials and other allowable costs.
How to claim a CIS refund
Sole traders and partnerships
For self-employed subcontractors and partners, CIS deductions are normally reconciled through the annual Self Assessment tax return.
HMRC will compare:
- Total income
- Allowable expenses
- CIS deductions suffered
- Tax and National Insurance liability
If too much tax was deducted, HMRC will automatically calculate the overpayment and issue a refund.
Limited companies
For limited companies, CIS repayments follow a different process. The claim mus tbe made using the UK government Gatway
https://www.gov.uk/guidance/claim-a-refund-of-construction-industry-scheme-deductions-if-youre-a-limited-company#claim-online
The company can offset CIS deductions against liabilities such as:
- PAYE
- Employer National Insurance
- Employee National Insurance
- CIS liabilities
Where deductions exceed liabilities, repayment claims are normally made online.
Calculations and supporting evidence may be requested by HMRC.
Keep your Payment and Deduction Statements (PDS)
HMRC may request Payment and Deduction Statements (PDS) as evidence of deductions made.
The contractor should provide these monthly statements showing:
- Gross payments
- Materials
- CIS deductions
- Tax month details
The PDS should be issued within 14 days after the end of each CIS tax month.
Keeping these statements organised can help avoid delays if HMRC requests supporting evidence.
How to maximise your CIS refund
Many subcontractors miss out on money simply because they do not claim all available expenses.
Some ways to maximise your CIS refund include:
- Claim all allowable business expenses
- Keep receipts and invoices organised
- Maintain accurate bookkeeping records
- Retain all CIS Payment and Deduction Statements
- Submit tax returns accurately and on time
Good record keeping can significantly increase the accuracy of your claim.
How long does a CIS refund take?
HMRC generally processes CIS tax refunds within 2–4 weeks, although processing times can increase during busy periods.
Delays are more common where HMRC requests additional information or supporting evidence.
Common CIS mistakes that delay refunds
Some common issues include:
Incorrect Self Assessment or Corporation Tax calculations
Errors can lead to underclaiming and leaving money behind, or overclaiming which may result in repayments being clawed back with possible penalties and interest.
Not keeping Payment and Deduction Statements
While HMRC may not ask for these immediately, they regularly compare contractor submissions against subcontractor records.
Missing allowable expenses
Many subcontractors fail to claim legitimate business expenses, reducing their refund.
Poor record keeping
Missing invoices and incomplete records can slow down the entire process.
More details can be found here.
https://www.gov.uk/government/publications/construction-industry-scheme-cis-340/construction-industry-scheme-a-guide-for-contractors-and-subcontractors-cis-340
Need help with your CIS refund?
Whether you are a plumber, electrician, roofer, builder, painter or other tradesperson, understanding CIS can help ensure you are not overpaying tax.
At Hammer and Ledger Tax, we focus solely on supporting tradespeople with relevant tax advice, CIS refunds, bookkeeping and accounting support designed specifically for the construction industry.
