Reviewed by Connor Masters ATT, Senior Tax Specialist at RIFT Tax Refunds

If you’re self-employed and work for a contractor in the construction industry as part of the Construction Industry Scheme (CIS), you’ll need to complete a CIS self-assessment return.

Here we’ll look at everything you need to know.

What is CIS and how does it work?

The CIS is a set of rules for construction contractors detailing how they pay their subcontractors. If you’re a subcontractor, when you get paid by the contractor they will take a cut of the money and send it directly to the taxman.

This goes towards your Tax and National Insurance Contributions and is currently set at 20%.

So, as soon as you get paid you immediately lose 20% of your income. Now, this does mean that your tax is effectively covered. But what it also means is that you might be paying too much tax. After all, there are your costs to think about, whether you’re regularly paying out for new tools, meals on the road or accommodation if you need to stop overnight when travelling. Plus, it doesn’t factor in your tax-free allowance either.

To make sure you pay the right amount of tax and get back what you’re owed, you’ll need to submit a CIS self-assessment tax return.

What is a CIS self-assessment tax return?

If you work for a contractor under the CIS, you’ll likely need to provide a CIS tax return to HMRC. Here you detail all your earnings for the financial year.

First you’ll need to register for the CIS scheme online. To do so, you’ll need:

  • Your legal business name: you can also give a trading name if it’s different to your business name
  • The Unique Taxpayer Reference (UTR) for your business
  • Your VAT registration number (if you’re VAT registered)
  • The date you started trading

You’ll need to submit your CIS tax return by 31st January covering the previous financial year. So for the financial year just finished on the 5th April 2024, you must have your return boxed off by 31st January 2025.

Boosting deductions for CIS self-assessment

The CIS regulations are in place to crack down on tax evasion in the construction industry, but as an honest, hard-working subcontractor they can hit pretty hard. You immediately lose 20% of your income to cover your tax, but this doesn’t account for your tax-free allowance (up to £12,570 a year) or take into account your costs.

Thankfully, you can claim money back through a CIS tax rebate when you do your CIS self-assessment return. You can claim for:

  • Travel costs: Either mileage expenses using your own vehicle or public transport costs
  • Meals while you’re working or on the road
  • Accommodation if you need to stop overnight while travelling
  • Parking fees and tolls you have to pay yourself
  • Upkeep and replacement of any essential tools or protective equipment
  • Public liability insurance and fees to professional bodies
  • Home office bills like phone use, postage and stationery
  • Accountancy fees

These are viewed as the essential costs of doing business, and they count against the income you're being taxed on so you can claim them back in the form of a CIS tax rebate.

We’ve said this before many times and we’ll say it again. HMRC isn’t in the business of doling out free money. This means that when you submit your tax return, it needs to be squeaky clean. You can only claim for expenses that you actually incurred and that are wholly and exclusively for your business.

HMRC may also ask for a compliance check on your return. That means they will want to see evidence of these expenses and proof that they were exclusively business expenses.
Never make up expenses or try to put personal expenses down as business expenses. HMRC penalties can be severe.

Ensuring compliance: Key considerations

To make sure your tax rebate is successful and you’re paid back what you’re owed from the taxman, it’s so important to get the process right and be fully compliant. Make sure you:

File on time

You have until the 31st January to file for the previous tax year, but you don’t have to wait until the last minute. Filing early – as soon as the tax year is finished – means your claim will be processed quicker and you’ll get the money back sooner.

But if you do wait until the last minute and you file after the deadline has passed, you can be fined. This can be up to £100 for just a day late or up to £900 for being three months late.

Keep receipts and records

If you’re claiming back business expenses, you need to have evidence for them. It makes sense to keep a log of each and every expense, so you’re not trying to remember what happened six months ago.

And always keep receipts for everything you pay out. This could be a meal on the road, new tools or hotel accommodation. The more detail you have, the easier it is to claim.

Avoid mistakes on your tax return

Your CIS tax return is not something to be rushed. All too often, we see simple mistakes cause problems for people with HMRC. Some of the most common include:

  • Forgetting to sign a paper tax return
  • Skimping on the details and not providing enough information
  • Getting your sums wrong
  • Poor expense calculations

If you make a mistake on your tax return, you’ll generally have to wait another 12 months until you can correct the mistake. That means you could miss out on the money you’re owed for another year.

Expert insights: Gross Payment Status

It’s worth understanding Gross Payment Status (GPS), as if you can secure it you won’t have the 20% deducted from your pay by your contractor. You’ll be paid in full, without anything going to HMRC first. It’s then up to you to pay your tax when you submit your tax return.

To obtain GPS, you must:

  • Have at least £30,000 turnover as a sole trader (£100,000 if you’re a limited company)
  • Have filed all your tax returns on time and made all your tax payments without missing a deadline in the last 12 months
  • Do construction work in the UK and have a UK bank account

In the new tax year, we’re seeing increased regulation come into effect to make this tougher and more stringent. Now HMRC can withdraw Gross Payment Status for any fraudulent information on tax returns or in relation to VAT and PAYE regs. You need to be all over it with your returns and have an expert accountant in your corner to ensure you comply with all the rules and regulations.

Get help with your CIS tax return or refund

When dealing with HMRC, it pays to have a specialist working on your behalf. RIFT Refunds was built to help the UK’s tradesperson community tackle the taxman. We have specialist construction teams to help you get the best out of your CIS self-assessment tax return and CIS tax refund claims.

Get in touch with us today to find out more.