CIS Tax Refund Guide

The Construction Industry Scheme (CIS) is a system ran by HMRC specifically for self employed sub contractors in the construction sector.

If a sub contractor in the construction industry overpays tax they can reclaim a CIS tax refund from HMRC through self assessment.

As part of the CIS contractors must withhold a portion of a subcontractor’s pay and remit it directly to HMRC, which is different from other self employed individuals who typically receive payments without any deductions.

Currently the CIS tax rate stands at 20% with the tax used as part of your tax and national insurance contributions.

This process can result in CIS subcontractors overpaying tax along with any expenses they have personally incurred related to their work.

HMRC expects subcontractors to complete an annual self assessment tax return to declare their income, tax deductions and reclaim their CIS tax refund.

Subcontractors who are registered under CIS can apply for tax relief on eligible expenses through their CIS tax return.

Claiming for allowable self employed expenses helps lower your taxable income and potentially enhances the amount of any CIS tax refund you may be entitled to.

Our CIS tax refund guide is here to let you know more about CIS tax refunds, tax returns and the expenses that you can claim for to reduce your tax bill 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.

A CIS tax refund is essentially HMRC giving you back the overpaid portion of tax that has been deducted by your contractor.

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 might be able to 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.

In year CIS tax refund if you have stopped self employment 

If you have stopped self employment as a CIS sub contractor in the current tax year and your tax matters are up to date, HMRC can agree to refund your overpaid CIS tax before the current tax year ends.

This option can be useful for speeding up the recovery of your CIS rebate because you don’t have to wait until the end of the current tax year to file your tax return.

HMRC makes available the form CIS40 if you are an individual seeking to reclaim subcontractor deductions for the current tax year or CIS41 if you are in a partnership.

Subcontractors have the option to either use the online form service or fill out the form on-screen, print it, and send it by post to HMRC’s address shown on the form.

Accessing the online service requires a government gateway user ID and password. The online form provides a reference number, allowing you to monitor its progress.

If you use form CIS40 or CIS41 you must still submit your tax return for the year your construction work concluded and include any CIS tax rebate received from HMRC on your 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.