Can I Reclaim Overpaid CIS Tax from HMRC

If you work in the construction industry as a subcontractor, you may find that you have paid too much tax through the Construction Industry Scheme (CIS). Under CIS, contractors deduct tax from your payments and pass it to HMRC, but because these deductions are made at a fixed rate, it is common for subcontractors to overpay. The good news is that you can reclaim this money. This article expla ins how CIS overpayments happen, how to claim a refund, and how long it takes HMRC to process it.

What is the Construction Industry Scheme (CIS)

The Construction Industry Scheme is a system HMRC uses to collect tax from payments made to subcontractors working in construction.

Contractors deduct tax at source when they pay subcontractors, usually at one of the following rates:

  • 20% for registered subcontractors.

  • 30% for unregistered subcontractors.

  • 0% if the subcontractor has gross payment status (no deductions at source).

These deductions are treated as advance payments towards your tax and National Insurance. However, because the deductions are based on your gross income rather than your actual profit, you may pay more than you owe.

How CIS overpayments happen

CIS tax deductions are made before your business expenses are considered. As a result, HMRC’s system may assume you owe more than you actually do.

You might overpay CIS tax if:

  • You claim legitimate business expenses such as tools, materials, or travel.

  • You worked for multiple contractors who deducted CIS tax at different rates.

  • You switched from self employment to limited company status.

  • You qualified for gross payment status but the contractor continued to deduct tax.

In most cases, you will realise you have overpaid when you complete your Self Assessment tax return.

How to reclaim overpaid CIS tax if you are self employed

If you are registered as a self employed subcontractor, your CIS deductions are treated as advance payments towards your annual tax bill.

To reclaim overpaid CIS tax, follow these steps:

1. Complete your Self Assessment tax return

You must include all income from construction work and all CIS deductions made by contractors during the tax year.

Your contractors should provide you with CIS payment and deduction statements each month. These show the total amount paid to you and the tax deducted.

Enter these details into your Self Assessment tax return under the “Construction Industry Scheme” section.

2. Submit your return to HMRC

Once HMRC processes your return, it will calculate whether you have overpaid or underpaid tax.

If you have overpaid, HMRC will issue a tax refund directly to your bank account or offset it against any outstanding tax liabilities.

3. Receive your refund

Refunds are typically processed within two to three weeks if you file online, but it can take longer during busy periods. HMRC will usually send you confirmation once the refund is approved.

If you have other debts with HMRC, such as unpaid VAT or National Insurance, the refund may be used to reduce those balances first.

How to reclaim CIS overpayments if you are a limited company

If you run your construction business through a limited company, the process is slightly different because your company pays Corporation Tax instead of personal Income Tax.

Your company’s CIS deductions can be offset against its PAYE or Corporation Tax liabilities.

Step 1: Report CIS deductions through payroll

You must report the CIS tax deducted by contractors using your company’s PAYE system. Include these figures on your monthly Employer Payment Summary (EPS) submission to HMRC.

This tells HMRC how much CIS tax has been deducted from your company’s income and allows them to offset it against your PAYE liabilities.

Step 2: Offset CIS deductions

HMRC will use the reported CIS deductions to reduce your PAYE bill. If your CIS deductions are higher than the PAYE due, the excess can be carried forward to future months.

Step 3: Apply for a refund at the end of the tax year

At the end of the tax year (after 5 April), if your company still has CIS tax left over after offsetting PAYE, you can apply for a refund.

You can do this by:

  • Writing to HMRC’s CIS Refunds team or using their online service.

  • Providing your company’s name, PAYE reference, and UTR.

  • Including bank details for payment.

HMRC may ask for supporting documents such as CIS deduction statements or proof of payments before processing your claim.

Refunds for limited companies often take longer than for sole traders, typically 6 to 8 weeks, as HMRC needs to reconcile your company’s PAYE account first.

How to check the progress of your refund

You can track the status of your CIS refund by:

  • Logging into your HMRC business tax account.

  • Calling HMRC’s CIS helpline.

  • Asking your accountant to check using their agent portal.

Make sure your contact details and bank information are correct to avoid delays.

If it has been more than 12 weeks since you submitted your claim, you can contact HMRC for an update.

What if you are not registered for CIS

If you are a subcontractor who has not registered for CIS, contractors will deduct tax at the higher rate of 30%.

You can still reclaim overpaid tax through your Self Assessment tax return, but you should register for CIS as soon as possible to ensure future deductions are made at the correct rate.

Registering as a CIS subcontractor can be done online through HMRC’s website or by asking your accountant to handle it on your behalf.

Tips for avoiding future CIS overpayments

  • Keep accurate records: Store all CIS deduction statements and invoices.

  • Register for gross payment status: If you meet HMRC’s criteria, you can receive full payments without deductions.

  • Use accounting software: Digital tools help track deductions and reconcile income accurately.

  • Submit returns early: Filing early gives you more time to spot errors and receive refunds faster.

  • Work with an accountant: They can manage your CIS records and ensure your deductions and refunds are handled correctly.

How an accountant can help with CIS refunds

An accountant can simplify the CIS refund process by:

  • Checking that all deductions have been recorded correctly.

  • Preparing and submitting your Self Assessment or Corporation Tax return.

  • Liaising with HMRC to speed up refund payments.

  • Advising on gross payment status applications to avoid future deductions.

  • Ensuring that CIS refunds are reconciled accurately in your accounts.

Professional support ensures you claim the full amount owed and stay compliant with HMRC’s CIS rules.

Final thoughts

If you have paid too much CIS tax, you are entitled to reclaim the overpayment from HMRC. The process depends on whether you are self employed or trading as a limited company, but in both cases, keeping detailed records of CIS deductions is crucial.

By filing accurate returns, applying promptly, and using professional advice where needed, you can recover your money faster and avoid future overpayments. Understanding how CIS tax works will also help you manage your cash flow more effectively throughout the year.