Work in construction under the Construction Industry Scheme (CIS)? There’s a chance you’re due a tax refund. Contractors deduct tax from your pay at 20% (or 30% if you’re not registered), often leading to overpayments. A CIS refund helps you reclaim that overpaid tax.

Knowing when and how to claim your CIS refund is important. Timing can impact how quickly you receive your money and how much you get back. Whether you’re a sole trader, limited company or new to CIS, here’s what you need to know.

How do CIS deductions work?

Under CIS, contractors deduct tax from your payments before you receive them. The standard rate is 20% for registered subcontractors and 30% if you’re not registered. These deductions are sent to HMRC on your behalf.

However, the deductions don’t account for your personal allowance or business expenses. As a result, many subcontractors overpay tax and are eligible for a refund. Sounds good, right?

The annual Self Assessment route

For most sole traders, the standard way to claim a CIS refund is through the Self Assessment tax return. After the tax year ends on 5 April, you can file your return, detailing your income, expenses, and CIS deductions.

HMRC calculates your actual tax liability and compares it to the deductions made. If you’ve overpaid, they’ll issue a refund. Filing online is faster, with refunds typically processed within two to six weeks. Paper returns can take longer.

Making Tax Digital (MTD) is set to change how Self Assessment works over the next two years, moving towards more frequent digital submissions. Quarterly updates come with the aim of helping you keep on top of your tax through the year, meaning you’re less likely to overpay in the first place.

In-year repayment claims

In certain situations, you don’t have to wait until the end of the tax year to claim a refund. If you’ve stopped working in construction or your deductions significantly exceed your tax liability, you can make an in-year claim.

For individuals, this involves submitting form CIS40. For companies, form R38 is used. You need to provide documentation like Payment and Deduction Statements (PDS) and bank statements. Processing times vary but can be quicker than annual claims.

CIS refunds for limited companies

Limited companies reclaim CIS deductions through their PAYE system. Each month, you submit a Full Payment Submission (FPS) and an Employer Payment Summary (EPS) to HMRC, reporting CIS deductions.

These deductions are offset against your company’s PAYE and National Insurance liabilities. If deductions exceed liabilities, you can request a refund at the end of the tax year. It’s a good idea to ensure all PAYE and Corporation Tax filings are up to date to avoid delays.

CIS refunds for sole traders

If you’re a sole trader, you can claim CIS refunds through your annual Self Assessment tax return. You report your total income, allowable expenses and CIS deductions. HMRC then calculates your tax liability and issues a refund if you’ve overpaid.

Typical refunds vary but can be substantial, especially if you’ve had significant expenses. Keeping accurate records is key, as well as submitting your return on time to avoid penalties and delays.

Thinking about switching from PAYE to CIS to maximise your refund? Here’s what to consider before making the move.

First-time CIS refund claims

If you’re new to CIS, your first refund claim may take longer due to additional verification checks by HMRC. You usually need to provide extra documentation, such as proof of identity and business records.

Ensure you’re registered with HMRC and have your Unique Taxpayer Reference (UTR) number. Retain all your CIS statements and expense records to support your claim, helping you stay on track with what you’re owed and on the right side of the rules.

Seasonal and cash flow considerations

Timing your CIS refund claim can impact your cash flow. If you rely on refunds for significant expenses or investments, plan your claim accordingly.

Some subcontractors opt for in-year claims to improve cash flow, while others wait until the end of the tax year for a larger lump sum. Consider your financial needs and speak to a tax professional to figure out the best approach if you need to.

Common CIS refund problems and delays

Several issues can delay your CIS refund:

  • Missing or incorrect documentation: Make sure all your CIS statements and expense records are accurate and complete.
  • Verification checks: HMRC may request additional information, especially for first-time claims.
  • Discrepancies between records: Ensure your records match those submitted by your contractors.
  • Late submissions: Filing your return late can result in penalties and delayed refunds.

To avoid these issues, keep accurate records and submit your returns promptly.

Recent changes to CIS refund processes

HMRC is moving towards digital submissions under Making Tax Digital (MTD). This will change how you file your CIS tax returns and claim refunds over the next two years. Staying informed about these changes will help you adapt and ensure timely refunds.

Additionally, HMRC has updated its service standards, aiming to process refunds more efficiently. However, during peak times, delays can still happen.

Get the ball rolling on your CIS refund

Claiming your CIS tax rebate doesn't have to be complicated. At RIFT, we’re experts in handling CIS refunds, helping you get back every penny you’re owed. Our team will manage the paperwork, navigate HMRC’s processes, and keep you informed every step of the way.

Ready to claim your CIS rebate? Use our CIS refund calculator to estimate your refund, or get in touch with us to get started.