Getting Your CIS Refund from HMRC

At Towerstone Accountants we provide specialist CIS accountancy services for contractors and construction businesses across the UK. We created this webpage for subcontractors and contractors who want clear guidance on the Construction Industry Scheme, including registration, deductions, refunds, and ongoing reporting obligations. Our aim is to help you stay compliant with HMRC, avoid costly errors, and understand how CIS affects your tax position.

If you work in the construction industry as a subcontractor there is a very strong chance that tax has been deducted from your payments under the Construction Industry Scheme, usually at 20 percent if you are registered or 30 percent if you were not verified at the time, and one of the biggest misunderstandings I come across is the belief that this deduction is the final tax bill or that once it has been taken the money is gone for good, in reality CIS is simply a system of paying tax in advance and for a large proportion of subcontractors it leads to an overpayment that can and should be reclaimed from HMRC.

From my own experience dealing with CIS returns and refunds week in week out I can say that most problems arise not because people are not entitled to a refund but because the process has not been followed correctly, records are incomplete, or the claim has been made in the wrong way for the type of business involved, once those issues are fixed the refund itself is usually very straightforward.

In this article I am going to explain how claiming a CIS refund actually works in practice, who can claim and when, what information HMRC expect to see, how the process differs if you are self employed compared to running a limited company, and what to do if your refund is delayed or queried, the aim is that by the end you understand exactly where you stand and what steps to take next.

What a CIS refund really is and why so many people overpay

CIS deductions are best thought of as advance payments towards your eventual tax and National Insurance bill, every time a contractor deducts CIS from your invoice they pass that amount over to HMRC on your behalf and it is credited to your tax record, the important point is that this happens before your actual profit has been calculated.

Your real tax bill is based on profit not turnover, once allowable expenses are taken into account, and this is where overpayments arise, many subcontractors have significant costs such as tools, equipment, fuel, protective clothing, phone bills, insurance, training, vehicle costs, and accountancy fees, all of which reduce taxable profit but are completely ignored when CIS is deducted at source.

Overpayments are especially common if your income fluctuates during the year, if you have periods with little or no work, if you stop trading part way through a tax year, or if you were deducted at 30 percent because you were not registered at the time, in all of those cases the CIS deducted often far exceeds the tax actually due once everything is properly calculated.

Understanding what CIS is deducted from so your figures tie up

One area that causes confusion and delays is what CIS should and should not be deducted from, CIS is normally applied to the labour element of your invoice only, materials that you have paid for yourself should not be subject to CIS, and VAT is also excluded if you are VAT registered, when these rules are not followed it can lead to deductions being higher than they should be which then creates discrepancies when you submit your figures to HMRC.

From a practical point of view this means your invoices your CIS statements and your own records all need to agree, if a contractor has deducted CIS incorrectly you can still reclaim the tax through your return but it often leads to extra questions or delays, which is why getting invoices right from the outset makes life much easier.

Who can claim a CIS refund

Whether you can claim a CIS refund and how you do it depends entirely on how you trade, and this is where people often go wrong.

If you are self employed as a sole trader then your CIS refund is claimed through your Self Assessment tax return, if you trade through a limited company then the refund is claimed through the company’s payroll and corporation tax position, these are very different processes and mixing them up almost always causes problems.

I will deal with each in turn because the steps and timing are not the same.

Claiming your CIS refund if you are self employed

If you are self employed CIS deductions are reclaimed through your annual Self Assessment tax return, there is no separate refund form and no need to contact HMRC to ask for the money back, the return itself is the claim.

When completing your tax return you declare:.

• Your total income before CIS deductions

• Your allowable business expenses

• The total CIS tax deducted during the tax year

HMRC then calculate your tax and National Insurance based on your profit and set the CIS deductions against that liability, if the deductions exceed what you owe the difference becomes your refund.

The key thing here is accuracy, HMRC will only refund what you can evidence, which means your CIS deduction figures must match the records held on HMRC’s system, those figures come from the monthly CIS returns submitted by your contractors, if a contractor has failed to report a deduction or has used the wrong details it can result in your refund being reduced or delayed.

When you can expect to receive your CIS refund

For most self employed subcontractors the refund becomes available once the tax return has been processed, if you file online and there are no issues this is often within two to four weeks, although it can take longer during peak periods or if HMRC carry out additional checks.

It is important to understand that you cannot normally claim a CIS refund mid year through Self Assessment, the system is designed around the tax year, however if you stop trading and will not have any further income it may be possible to finalise your position early, this is an area where professional advice is strongly recommended because doing it incorrectly can cause more problems than it solves.

You may also find our guidance on how to claim back cis suffered as a limited company and check cis payments online helpful when dealing with related CIS questions. For a broader overview of CIS rules, compliance, and support, you can visit our CIS guidance hub.