CIS Tax Refund Guide

Did you know that if you are registered on the Construction Industry Scheme (CIS), you could be owed a CIS tax refund? 

As a self employed contractor you can reclaim many of your business expenses against the deductions that your contractor made from your pay throughout the year.

CIS-registered sub-contractors in the construction industry are entitled to claim tax relief on eligible expenses on their CIS tax return.

Many contractors don’t realise just how much they are entitled to claim and can easily miss out on some or all of their CIS tax refund by not navigating the process in the best way.

Our CIS tax refund guide is here to let you know more about CIS tax refunds, tax returns and the expenses you can claim for as a CIS sub contractor.

What is CIS?

CIS stands for Construction Industry Scheme. The Construction Industry Scheme is a method designed by HMRC to collect tax from sub-contracted operatives in the construction industry.

The contractor deducts tax directly from the operative’s payments, passing them directly to HMRC.

All sub-contractors are obliged to register under the scheme and complete a CIS tax return annually.

Because tax has been deducted ‘at source’ (In other words, directly from their pay), the sub-contractor is then able to reclaim some of that money to compensate for certain ‘allowable’ expenses that were paid for throughout the tax year.

What is a CIS tax refund?

Without being part of the CIS scheme, contractors will by default deduct 30% tax from your monthly pay, which often exceeds the amount of tax you need to pay.

Enrolling in the CIS scheme reduces the automatic deduction made by your contractor to 20% but after expenses have been deducted from your total gross income it is common to still overpay tax and be due a CIS tax refund from HMRC.

The CIS tax refund is essentially HMRC giving you tax back that you have already paid through your contractor during the previous tax year.

What can I claim for on my CIS tax return?

You can claim for a wide range of expenses under CIS. Some of the most common ones include:

• Business travel − including public transport costs, as well as your motorbike, van or car.
• Tools and equipment – and any protective clothing.
• Accommodation and subsistence – especially if you have to stay away from home.
• Use of your home – including mobile phone bills.
• Professional fees – such as insurance, accountant’s fees and bank charges.

For six tax years it’s a good idea to hold on to your receipts for everything you have to buy, and keep a note of the places you travelled to and dates.

HMRC can open a compliance audit regarding your CIS tax return which usually asks for proof that firstly, you indeed had an expense (receipts) and secondly, this expense was entirely and solely for your business operations.

Not sure what you can and can’t claim for? You can find out more in our ‘what can I claim for on my CIS tax return’ FAQ.

How much CIS tax refund will I get back?

The amount of tax you can claim back will depend on a few things like:

• Your total income which includes earnings from sources outside of CIS.
• How much tax you paid on all of your income.
• What your expenses were.

Your personal allowance is important because it gives you a tax free amount that you can earn which is automatically given when you complete your tax return.

The personal allowance and your tax deductible expenses are both major factors in determining how much CIS tax you can have refunded.

Our free to use CIS tax rebate calculator is here to help you estimate what you can claim back from HMRC.

What you need to get a CIS tax refund

To complete your CIS tax return you’ll need information on all of your income and outgoings.

These include:

• CIS earning records, like pay statements, showing income and tax paid.
• PAYE P60 form or P45 certificate, if you’ve been employed. Copies can be usually be found in your personal tax account or on the HMRC app.
• Details of any property or investment income.
• Jobseekers allowance if claimed.
• Receipts or records showing any expenses you incurred.

You find out more about what you need as evidence in our CIS tax return faq’s.

How do I get paid my CIS tax refund?

HMRC will only repay your CIS tax refund after they have received and processed your self assessment tax return.

You can normally see the status of your self assessment tax return in your HMRC online self assessment account.

Your refund is normally paid by BACS to the bank details entered on your CIS tax return.

How do I know if I am in the PAYE or CIS system?

Lots of people in the construction industry are employed by and get paid by one company.

This can lead to confusion around whether you are in the PAYE or CIS system, particularly if your income tax is already deducted from your pay before you get it.

The CIS is unique to the construction industry and isn’t like any other self employed tax situation.

It is possible that two people working on the same site may appear to have the same working arrangements, but one is in full PAYE employment and the other is working under the CIS.

You need to look carefully at your payslip to see if your deductions are 20% (not 30% unless your contractor doesn’t have your UTR number) and if it says ‘CIS statement’ anywhere.

If you can identify both of these things then your tax is being paid within the Construction Industry Scheme.

How do I register for CIS?

You might be owed a CIS tax refund but if you don’t register properly for the scheme you won’t be able to claim it back from HMRC.

If you already have a ten digit self assessment UTR number the quickest and easiest way to register for CIS is online where HMRC will ask you for personal and business details to get you set up.

For individuals who don’t already have a self assessment record you can set one up online and select the option ‘working as a subcontractor’ when asked.