Blog, CIS

How do I claim a CIS refund?

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What is a Construction Industry Scheme contractor (subcontractor)?

If you qualify as a construction industry scheme (CIS) contractor or subcontractor, you’ll be supplying labour in the construction industry, including demolition, site preparation, building, labouring, decorating, and refurbishment.

Some jobs are exempt from the CIS (for what CIS covers, see para A.22). For example, if you provide scaffolding hire (without labour), architecture and surveying services, carpet laying, delivery of materials, or non-construction work, like running an on-site facility such as a canteen, you aren’t eligible to operate under the CIS scheme.

If you spend £1 million or more on construction within a three-year period, you are considered a CIS contractor. Where a contractor falls under both contractor and subcontractor categories, they must follow the rules for both categories.

Property developers buying and selling property, although not strictly speaking contractors, may fall under the aegis of the scheme, so advice should be sought from an accountant with expertise in this area to ensure absolute compliance with the CIS protocol.

Registration

All contractors must register with HM Revenue and Customs (HMRC) for the CIS; subcontractors that don’t wish to have higher-rate deductions made from their payments (at 30% rather than 20%) should also register with HMRC for the scheme.

After registration, HMRC provides contractors and subcontractors with the details about how to manage payments and apply for CIS refunds. For more, see registering for the scheme.

Applying for gross payment status

Subcontractors can apply for gross payment status, whereby no deductions will be taken from their payments, but there are certain qualifying conditions. See how to apply to be registered for gross payment.

Who can claim a CIS tax refund?

Whether self-employed, sole trader, partnership, or limited company, CIS subcontractor and contractor workers must be registered under the construction industry scheme CIS to be eligible to make a CIS claim and recover overpaid tax. Their status will determine if deductions have been made in the first place and they’re due a tax refund. Gross payment status negates advance payments of tax and national insurance contributions (NICs).

For those who’ve made advance contributions and wish to claim CIS repayments (using form CIS40) for overpaid tax and national insurance, certain conditions must be met:

Worked for the same company at two or more construction sites in the past four years;
Hold full records of monthly deduction statements showing CIS taxable income, NICs, and other tax details;
Used either their own vehicle or public transport to get to and from work;
CIS registered.

Generally, CIS repayment claims can only be backdated to the last four years. A refund claim can be made for the previous tax year after the construction job has ended, only providing that the claimant’s tax history shows consistent reliability.

What can I claim back through CIS?

The method of claiming CIS tax rebates will depend on how you are registered for CIS. Sole traders and partnerships need to complete and file a self-assessment (SA) tax return outlining the full amounts invoiced for subcontracted work and received as income; any deductions made by a contractor should be included in the ‘total CIS deductions’ field.

After subtracting contractor deductions, HMRC will refund any overpaid tax. If you have underpaid tax, you’ll need to pay whatever you owe by 31 January.

Limited company subcontractors and contractors working under the CIS gross payment protocol need to complete a corporation tax return and declare all income. Any CIS deductions made will be paid back through the company’s monthly payroll scheme. Before HMRC makes CIS deductions for tax and NICs made via PAYE, the company must submit their full payment submission (FPS) and employer payment summary (EPS).

Unpaid CIS deductions can be carried forward to the next month or quarter in the same tax year in the PAYE bill. The EPS for the company should indicate that it has nothing to pay and inform HMRC that its PAYE bill for the period is zero.

If you’re both a limited company subcontractor and a contractor, you need to register for the CIS in both roles. Note that overseas-based subcontractors carrying out construction work in the UK must also register.

As a CIS contractor or subcontractor working as a sole trader or through a partnership, providing you are registered for the CIS with HMRC and have a Unique Taxpayer Reference (UTR) under self-assessment, you can reclaim overpaid NICs and tax and expenses (providing they ‘wholly and exclusively’ relate to running your business) on your self-assessment tax return.

The most common forms of allowable expenses are:

Vehicle expenses: Providing the vehicle is exclusively for business use, you can reclaim tax on the purchase (as a capital expense) and for fuel, maintenance, insurance, and road tax.

Mileage: Incurred while travelling to and from a temporary workplace (e.g., to–from contracted jobs or suppliers or any journey directly related to work). Note that the temporary workplace rules may not apply if the contracted job lasts for more than 24 months.

Travel/Subsistence: Expenses can be claimed for journeys to and from work and subsistence when at work. Here, the same temporary workplace rules apply.

Plant, tools, equipment, and work clothes: Purchases or replacements of tools, protective clothes, and other work-related equipment are allowable expenses.

Admin costs: ‘Remaining admin costs’ are those that enable contractors or subcontractors to carry out their work (e.g., landline/cell phone, stationary, postage).

General company running costs: Relevant public or tax liability insurance, trade union fees, and home-office costs are legitimate tax-deductible expenses.

What items are NOT allowable CIS expenses?

Only allowable expenses should be included on your CIS tax return. Items NOT normally classified as allowable expenses by HMRC are:

Rent or mortgage repayments for your personal residence;
Subsistence (unless temporary workplace rules apply);
Own salary, NICs, pension, and any other fees for services or work carried out unless ‘wholly and exclusively’ for business purposes;
Legal fees in relation to fines for offences, tax liability, or any legal element related to the purchase of plant machinery or property;
Personal travel, journeys related to commuting between home and permanent workplace, and purchase of vehicles not related wholly and exclusively to work;
Hardware purchases for office/admin (computer, phone, etc.), apportioned between private/business use if dual use;
Subscriptions to political parties, charities, or clubs;
Unless specifically business-related, loans, overdrafts, or other financing repayments, any recoverable costs linked to insurance claims;
Bad debts not included in turnover – any debt connected to a fixed asset;
Initial expenses for the purchase of business premises;
Utilities, apportioned between private/business use if dual use;
Hospitality, entertaining suppliers/customers/clients;
Any goods and/or equipment for private use – apportioned between private/business use if dual use;
Asset depreciation of equipment, losses on asset sales;
Maintenance for building extension/renovation, repairs unless specifically business-related;
Clothing, except specifically for work use (uniform, specific work clothes (e.g., high-vis wear), items such as boots, hardhat).

Including non-allowable expenses on your return can incur penalties and probably mean having to pay tax (and interest) on the items claimed illegitimately.

How far back can you claim CIS?

CIS workers who suspect they’ve overpaid tax can submit a backdated CIS tax refund claim for the past four years, providing they have worked for the same company on two or more construction sites and/or used public transport or their own vehicle to get to and from work. Workers’ backdated CIS repayments typically amount to around £2,500.

How do you claim a CIS refund online?

Limited company subcontractors can claim tax rebates for CIS overpaid tax online by using their Government Gateway account to log into their tax section.

To streamline the CIS tax refund process and avoid HMRC miscalculations, it’s best to claim CIS refunds either at the end of the company’s financial year or at the end of the tax year to avoid any CIS contracts being left out of the calculation.

For instructions about how a limited company construction contractor or sole traders can claim CIS tax refunds online or by post, see the gov.uk Guidance page.

You’ll need to provide the following:

Company name, telephone number, and UK address;
PAYE reference numbers;
Unique taxpayer reference numbers;
Estimated over-payment figure.

If you want HMRC to deduct your tax refund from other amounts owing, you should provide the following:

Corporation tax UTR and either the end date of your limited company accounting period or accounting period number;
VAT registration number and the VAT Return period;
To set the tax refund against ‘other liabilities’, include the type of charge, year, or period it refers to and any reference numbers.

It’s not necessary to submit supporting information with your claim to HMRC. Further details may be requested if there’s a mismatch between your claim and HMRC’s records.

If you want your construction industry scheme CIS refund to be paid into a bank or building society account, you’ll need to provide HMRC with the following:

Bank or building society name;
Bank account number and sort code;
Account holder’s name.

You can create an agent services account for an accountant or other third party to look after the refund on your behalf.

You can make a postal claim by completing form R38. Your application must include the same personal and financial details (see above) and the company name and PAYE reference, which should be sent to CIS, National Insurance Contributions and Employer Office, HM Revenue and Customs, BX9 1BX.

Can I claim a CIS refund without a self-assessment tax return?

If sole traders’ CIS subcontractor work stops or the job finishes midway through the current tax year, it may be possible to claim a refund of overpaid CIS tax before the end of the current tax year, providing there’s no outstanding tax liability and their self-assessment tax returns are up to date.

See HMRC form CIS40 for subcontractor CIS tax deduction reclaims and CIS41 for partnership CIS deductions. To claim online, you’ll need access to HMRC’s online service, which requires a government gateway user ID and password. Online forms can also be completed and printed before sending to the address on the form. You must still submit a self-assessment tax return for the year of the CIS tax deduction refund and include any rebate received.

Ideally, construction industry CIS repayment claims should be made via the contractor’s self-assessment tax return for the previous year’s CIS deductions. Normally, any CIS tax deduction under the scheme won’t translate to CIS tax rebates until HMRC has received the tax return. It’s essential for self-employed contractors or subcontractors to file their returns on time and accurately record the details from their CIS statements for the previous tax year in the relevant boxes to avoid payment of too much tax. To avoid CIS scheme errors and delays and to gain maximum tax relief, many contractors and subcontractors work with a specialist tax and CIS accountant.

How long does it take to claim back CIS?

HMRC processes CIS tax returns in 10–14 days. Delays are commonly due to additional security checks in accordance with the CIS guidelines.

An accountant can normally complete and file a CIS return in 24–48 hours, providing all the required information is on the tax return; generally, the rebate process takes around two weeks.

Filing online and providing bank account details for the refund is the fastest and most secure way to apply for and receive your CIS refund.

FAQs about CIS refunds

Below are our most frequently asked questions regarding CIS refunds.

How do I contact HMRC CIS?

Online

Ask HMRC’s digital assistant to quickly get an answer to your CIS query.

By phone

Call HMRC for general queries about the construction industry scheme. Make sure you’ve updated personal and contact details in your personal tax account, or you could fail telephone security. If you don’t already have a personal tax account, you can set one up.

Telephone: 0300 200 3210

Outside the UK: +44 161 930 8706

Can I contact HMRC by post?

You can write to HMRC for general enquiries about the construction industry scheme CIS or to appeal a penalty:

PT Operations
HM Revenue and Customs
BX9 1BX

Can I amend my CIS claim?

If you realise that you haven’t included the full amount, you can make an amended claim, either online or by post. If amending your claim by post, mark it ‘revised claim’ and provide the full amount being claimed; remember to refer to your original claim in the revised claim and send it to PT Operations, HM Revenue and Customs, BX9 1BX.

What happens if CIS deductions are not made?

The term ‘construction’ covers an array of services (site preparation, demolition, building, decorating, repairs, etc.). Although all B2B payments for completed construction work are covered by the construction industry scheme CIS, payments by private householders are not.

For example, money paid to the contractor by a householder will not be subject to CIS deductions. However, construction industry scheme CIS deductions will apply in situations where a contractor hires a subcontractor to assist in the same job. In this case, the contractor should check whether the subcontractor is registered for the scheme with HMRC; if not, the contractor makes the CIS tax deduction at the higher rate, whereby the subcontractor must pay tax at 30%. Note that CIS deductions do not apply if the householder pays the contractor and subcontractor directly.

Note that failure to check a subcontractor’s CIS status once or repeating the oversight over the years could lead to penalties amounting to tens of thousands of pounds for repeated abuse of the system.

Can I use an accountant to handle my CIS refund?

Our team of experienced accounting professionals prepare and submits CIS refund claims for hundreds of self-employed construction industry workers. We can help maximise your CIS tax refund, submit your annual returns, and navigate the complexities of making monthly construction industry scheme deductions. If planning to claim CIS refunds, it’s worth double-checking with a tax specialist. The rules for a limited company subcontractor or contractor (who should claim a CIS refund through the company’s payroll, not their corporation tax return) differs from those who are self-employed (who claim via their self-assessment tax returns). Common errors with refund claims include misunderstandings about business expenses and claiming before the end of the tax year (5 April). Limited company and self-employed construction workers benefit from dedicated CIS accounting services that guarantee 100% accuracy and compliance and avoid costly mistakes.

Conclusion

Due to the complexity of CIS administration, growing numbers of sole traders, partnerships, and limited company CIS contractors and subcontractors are hiring online accountants like Cloudco.

While managing the CIS yourself is possible, using the services of experts in contractor and CIS contractor accounting, along with the advantages of using Xero online accounting software to make the claim online, ensures that you never have to worry about non-compliance or about filing your CIS tax return correctly and on time.

We provide 100% reassurance that every deduction you may qualify for will be properly documented and submitted with your tax return or payroll system for the CIS; you’ll receive every allowance and tax-related benefit you are due; you’ll never fall foul of penalties for inaccuracies or late filing; and every part of the documentation process will be done accurately and filed before the deadline.