How to Apply for a CIS Refund in the UK: Step by Step Guide for self employed

CIS refund

Understand the Basics of CIS and Why You may Get a Refund

 

(CIS) in the UK covers most construction work, including alterations, repairs, decorating, and demolition related to buildings and infrastructure. Activities like delivering materials, architecture, surveying, and some scaffolding that is not part of the construction itself are not covered.

 

Deduction rate for CIS registered subcontractor is 20% while the rate for non registered one is 30%. If the subcontractor has a history of filing and paying taxes on time, he/she can get gross status from the HMRC and will get no deductions from hi/her payments.  

 

Private homeowners who are hiring construction work directly (and are not acting as businesses) are not considered contractors under CIS, so CIS does not apply to payments made by them.

 

Lets try to understand the CIS scheme working with the story of Sarah.

Sarah works in the construction industry as carpenter, and each time she gets paid, some of her money is taken off by her contractor for this-the so-called CIS deduction. That is what contractors are supposed to do to ensure that the right amount of tax is paid.

 

The CIS deductions are taken as an advance payment of tax. At the end of the year, if Sarah's true liability for tax is less-perhaps she had business expenses or personal allowances-she will be able to submit a claim for a refund.

 

Example:

If over the year Sarah's contractor deducted £2,000 but Sarah only owes £1,200 in tax she can claim back the extra £800.

 

Prepare Your Information

 

The main information she needs to obtain is the

  • UTR,
  • National Insurance Number, and
  • details of her CIS deductions.
  • the name and address of the contractor
  • the contractor’s tax reference 
  • the dates of the payments or the tax months when the contractor paid

 

All of the above information is available in Payment and deduction statements .

 

If she doesn't, she should request each from her contractors. HMRC may request proof of deductions, so keep that on file, for sure!

 

Types of CIS claim

 

CIS claim can be made either during the tax year or after the end of the tax year.

CIS claim for the current tax year can be made  by submitting CIS40 form online or sending CIS40 form by post

You can access both online and paper forms by clicking the links above.

Claim through CIS40 should only be made if;

  • you have ceased your business mid tax year  and your accounts are upto date
  • you paid all tax and Class 4 National Insurance contributions due
  • hold the original payment and deduction statements for the tax year
  • your tax affairs are upto date

Complete Your Self-Assessment Tax Return

 

That would involve her doing a Self Assessment tax return for that year of assessment to obtain the refund for that overpayment. She does this online via the website of HMRC.

Tip:

Sarah refers back to her CIS statement to check the correct amount deducted . Further, Sarah makes sure she does not miss any expenses she incurred in connection with her profession. These expenses are;

 

  • Tools and Equipment: Costs of buying, repairing, or replacing tools and equipment necessary for work (e.g., saws, drills).
  • Materials: Any materials used for completing jobs (e.g., wood, nails).
  • Protective Clothing: Necessary workwear such as safety boots, gloves, and helmets (but not ordinary clothing).
  • Travel Costs: Mileage for business-related travel (excluding commuting to a regular workplace) and other transport costs like public transport fares.
  • Motor Vehicle Expenses: Maintenance, repairs, insurance, and fuel costs for a van or car used for business purposes. Alternatively, the mileage allowance can be claimed.
  • Subcontractor Payments: Payments to subcontractors if they hire other workers under CIS.
  • Phone and Internet Costs: Business-related usage of mobile phones or the internet.
  • Office/Home Office Costs: If they have a home office, a proportion of utility bills like electricity, heating, and internet, or a flat-rate deduction based on hours worked from home.
  • Professional Fees and Subscriptions: Membership fees for trade unions or professional bodies relevant to carpentry.
  • Insurance: Business-related insurance, such as public liability insurance.
  • Training Costs: Courses to update skills or health and safety certifications relevant to carpentry.
  • Advertising and Marketing: Costs of business cards, flyers, or a website promoting their carpentry services.

 

 

For further reading on what expenses can de deducted , read or blog on allowable expenses.

File Your Tax Return

Once all relevant parts are complete, Sarah checks the information carefully. It all looks OK so she files her Self Assessment tax return . She makes sure, her bank details are provided.

If you would like to know how to file tax return, read our blog "How to File Your Self-Assessment Tax Return as a Self-Employed".

HMRC Work Out the Refund

 

Once Sarah has submitted her tax return, HMRC work it out. If she paid more through CIS deductions than what she owes in tax, then she is due a refund. HMRC posts a cheque or pays it directly into a bank account - whichever option was opted for by them.

 

Await Your Refund

 

She waits for her confirmation after her submission by checking her emails and letters from HMRC. This normally takes a few weeks, between 4 to 6 weeks; hence, she does not get impatient.

 

Contact HMRC if Needed

 

If she does not hear from them after 8 weeks, that would be the best time to get in touch with HMRC requesting a refund. She may contact them as follows:

 

Call the Self Assessment helpline on 0300 200 3210.

 Use your HMRC online account.

For CIS refund, You can check HMRC app at https://www.youtube.com/watch?v=ygbB3OHf28o.

 

Useful Links with Respect to Your CIS Refund

 

HMRC Self Assessment Portal: https://www.gov.uk/log-in-file-self-assessment-tax-return

Overview - Construction Industry Scheme: https://www.gov.uk/what-you-must-do-as-a-cis-subcontractor

Tax facts CIS by HMRC-https://www.youtube.com/watch?v=v7mm2OABn4U

Claim a CIS refund if you're an employer: https://www.gov.uk/guidance/claim-a-refund-of-construction-industry-scheme-deductions-if-youre-a-limited-company

Frequently asked questions

What is a CIS refund?

A CIS refund occurs when subcontractors in the construction industry have had too much tax deducted from their pay under the CIS scheme, and they are eligible to claim that excess tax back from HMRC.

How do I know if I am eligible for a CIS refund?

You are eligible if you are a subcontractor and the amount of CIS tax deducted from your payments exceeds your overall tax liability.

 

When can I claim a CIS refund?

You can claim after the tax year ends, typically from April 6 onwards for the previous tax year (e.g., April 2024 for the 2023/24 tax year). or if you have ceased trading mid tax year and have finalised your accounts, you can claim via  CIS40. 

 

How long does it take to receive a CIS refund?

It usually takes 2-4 weeks if the claim is straightforward. However, if HMRC requests further information, it can take longer—up to 8-12 weeks in complex cases.

 

What documents do I need for a CIS refund claim?

You will need:

  • Monthly CIS statements from contractors showing the tax deducted.
  • Your Unique Taxpayer Reference (UTR) number.
  • A copy of your self-assessment tax return.
  • Your National Insurance number.

 

What happens if I’ve missed a CIS refund claim for previous years?

 

You can still claim for the previous four tax years. Each year’s refund is separate, so you will need to file separate returns or amendments for each year.

 

How do I record CIS tax deducted from my income?

In the Self-Assessment return, on the self-employment pages, there is a specific section for reporting CIS tax deducted. Input the total amount deducted as shown on your monthly CIS statements.

 

What if my contractor has not provided me with CIS statements?

Contractors are legally obligated to provide monthly CIS deduction statements. If you haven't received these, request them immediately. HMRC may require proof of the deductions to process your refund claim.

What expenses can I deduct when claiming a CIS refund?

Deductible expenses may include:

  • Travel costs (e.g., to and from construction sites).
  • Tools and equipment.
  • Protective clothing.
  • Training and certification fees.
  • Use of home as an office (if applicable).
  • Ensure you maintain proper receipts and records for these expenses.