Guide
Claim a refund for CIS deductions
How CIS subcontractors can offset or claim back the tax deductions taken from their construction payments. Includes different processes for sole traders, partnerships, and limited companies.
When contractors pay you for construction work, they deduct tax from your payments and send it to HMRC. These deductions are payments on account of your tax liability - they are not additional tax.
At the end of the tax year, you can offset these deductions against your tax bill. If the deductions exceed what you owe, you can claim a refund.
What happens to your CIS deductions
The deductions taken from your payments work like advance tax payments:
- They are held by HMRC against your tax account
- At year end, they offset against your income tax, National Insurance, or Corporation Tax liability
- If deductions exceed your tax bill, the difference is refunded to you
- If deductions are less than your tax bill, you pay the balance
The amount deducted depends on your registration status with HMRC:
How you claim back deductions
The process for claiming back CIS deductions depends on your business structure. Sole traders and partnerships claim through Self Assessment, while limited companies use their payroll.
Keeping records - Payment and Deduction Statements
Your contractor must give you a Payment and Deduction Statement (PDS) within 14 days of the end of each tax month. This statement is essential evidence for claiming back your deductions.
The statement shows:
- Contractor's name and employer reference
- Tax month the payment relates to
- Gross amount of payment (before deductions)
- Cost of materials (if any)
- Amount of CIS deduction made
- Net amount paid to you
Keep all statements for at least 3 years after the end of the tax year they relate to. Without these statements, you cannot prove what deductions were made and may have difficulty claiming them back.
If a contractor does not give you a statement, ask for one in writing. You can report contractors who repeatedly fail to provide statements to HMRC.
When you will receive your refund
Refund timing depends on how you claim:
- Sole trader/partnership refund
- Typically 4-6 weeks after Self Assessment return processed
- Limited company monthly offset
- Immediate (reduces your PAYE payment each month)
- Limited company year-end refund
- Typically 4-6 weeks after claim submitted
- Self Assessment deadline
- 31 January following tax year end
What if your deductions are wrong
If the contractor has deducted the wrong amount, first check:
- Your registration status: If you are registered but a contractor deducted 30%, they may not have verified you correctly. Ask them to verify your CIS status with HMRC.
- Materials claimed: Deductions should only apply to labour, not materials you paid for directly. If materials were not excluded, raise this with the contractor.
- Calculation errors: Check the statement matches your invoice and the calculation is correct.
If the contractor has over-deducted, you can still claim the full amount back through your tax return. HMRC's records will show what was actually paid to them, regardless of what should have been deducted.
If you have not been paid at all
CIS only covers tax deductions - it does not help if a contractor refuses to pay you for work. If you have a payment dispute with a contractor, this is a commercial matter and you may need to pursue it through the courts or use adjudication.
Sole trader refund through Self Assessment
As a sole trader, you claim CIS deductions on your annual Self Assessment tax return:
- Enter your total gross construction income in the self-employment section
- Enter total CIS deductions suffered in box 61 (short form) or box 81 (full form)
- HMRC calculates your total liability and offsets the deductions
- Any refund is paid to the bank account on your tax return
You cannot claim CIS deductions back before the end of the tax year - you must wait for your Self Assessment return.
Comparison to other structures:
Limited company refund through payroll
Important: Limited companies must claim CIS deductions through payroll, not through Corporation Tax returns. You may receive a penalty if you try to claim through Corporation Tax.
The process is:
- Report CIS deductions suffered on your monthly Employer Payment Summary (EPS)
- HMRC offsets deductions against your PAYE and employer NI liability
- Pay only the balance (or nothing if deductions exceed liability)
- If you still have excess deductions at year end, claim a refund from HMRC
This gives you faster access to your money than waiting for a year-end refund.
Comparison to other structures:
Partnership refund through Self Assessment
Partnerships claim CIS deductions through the individual partners' Self Assessment returns, not the partnership return. Each partner claims their share of the deductions based on their profit share in the partnership.
The partnership return shows total CIS deductions suffered. Each partner then enters their allocated share on their personal Self Assessment return.
Comparison to other structures:
Common mistakes to avoid
- Limited companies claiming through Corporation Tax: This is wrong and can result in penalties. Always use payroll EPS to claim CIS deductions.
- Not keeping payment statements: Without statements, you have no evidence of deductions made. Keep all PDS documents for at least 3 years.
- Missing the Self Assessment deadline: If you file your return late, you will pay penalties even if you are owed a refund.
- Not claiming deductions at all: Some subcontractors forget to enter CIS deductions on their tax return, missing out on refunds they are entitled to.
- Mixing gross payment and net payment periods: If you gained or lost gross payment status during the year, make sure your records distinguish between periods.