If you’re a subcontractor under the UK’s Construction Industry Scheme (CIS), it’s likely that 20% (or even 30%) of your payments have been deducted for tax purposes. The good news? You might be entitled to reclaim some or all of that overpaid tax. Each year, many UK subcontractors miss out on refunds simply because they’re unsure of the process. Our guide will take you through the precise steps to claim your CIS tax refund, including how long it takes and tips for speeding up the process.
What Is a CIS Tax Refund?
Under the Construction Industry Scheme, contractors deduct tax at source before paying their subcontractors. While this ensures tax compliance, it often leads to overpayments, especially if you:
- Had business-related expenses throughout the year.
- Didn’t earn enough to owe that much tax.
- They are eligible for personal tax allowances.
A CIS refund involves claiming back that overpaid tax, typically through your Self-Assessment tax return. HMRC reviews your total income, allowable expenses, and the CIS deductions reported on your CIS deduction statements, then issues a refund if you’ve paid more than required. This refund process has become a yearly routine for many subcontractors, offering much-needed relief on cash flow and taxes. If you’re not claiming it, you’re effectively giving HMRC an interest-free loan!
Who Can Claim a CIS Tax Refund?
You may be eligible for a CIS tax refund if you are a subcontractor in the construction industry and have had tax deducted from your payments under the Construction Industry Scheme (CIS). Overpayments commonly happen when your CIS deductions exceed your actual tax and National Insurance liability for the tax year.
Here’s a breakdown of who can claim a CIS tax refund:
- Sole Traders – If you’re self-employed and registered under CIS, you can claim a refund if your deductions were higher than your actual tax bill.
- Partnerships – Partners in a construction business under CIS can claim their refunds individually through their Self-Assessment tax return.
- Limited Companies – If your company has deducted CIS tax, you can reclaim it through your Corporation Tax return or offset it against PAYE liabilities.
To claim a refund, you must file a Self-Assessment tax return and provide CIS deduction statements as proof of overpaid tax. If you’re unsure whether you qualify, it’s best to check, as unclaimed refunds remain with HMRC.
Expert Accounting Services
for Construction Companies
How to Reclaim Your Overpaid CIS Tax: Step-by-Step Process
Reclaiming overpaid CIS tax is a straightforward process, and following these steps will help ensure you get back any money you’re owed without much hassle. Here is the step-by-step process to reclaim your overpaid CIS tax:
Step 1: Gather Necessary Documentation
Collect all your CIS payment and deduction statements provided by your contractors. These documents detail the amounts deducted and are essential for your tax return. Additionally, gather records of all your income sources, business-related expenses, invoices, bank statements, and any other relevant financial documents. Maintaining organized records will streamline the refund process and support your claims.
Step 2: Complete Your Self-Assessment Tax Return
For sole traders and partnerships:
- Report your total income and allowable business expenses.
- Enter the total CIS deductions in the appropriate section of the tax return.
For limited companies:
- Use your company’s monthly payroll system to apply CIS deductions against your PAYE liabilities. Then, submit an Employer Payment Summary (EPS) to HMRC, outlining the CIS deductions.
Step 3: File Your Tax Return to HMRC
Ensure all information is accurate and submit your tax return by the deadline (31st January following the end of the tax year). Submitting late may lead to penalties and cause delays in receiving your refund. After submission, HMRC will process your return and calculate any refund due.
Step 4: Receive Your Refund
If you’re due a refund, HMRC will issue it after processing your tax return. The time frame varies, but typically takes a few weeks. To expedite the process, ensure all your information is accurate and complete, and submit your return as early as possible.
When Will You Get Your CIS Refund?
The time it takes to get your CIS refund can vary. Typically, HMRC aims to process refunds within 6 to 12 weeks after you submit your tax return. However, this timeline may extend during busy periods, like around the January self-assessment deadline, or if they need to carry out additional checks. To speed up the process, make sure your tax return is accurate and complete. If you haven’t received your refund within 4-8 weeks, consider contacting HMRC for an update.
How Much Can You Expect from Your CIS Tax Refund?
The amount of your CIS refund depends on a few things:
- Total Income Earned: This includes all the income you’ve earned through construction work under CIS.
- Allowable Expenses Claimed: Business-related expenses (like tools or materials) can reduce your taxable income and increase your refund.
- Total CIS Deductions Made: If your CIS deductions were higher than your actual tax bill, you’ll be eligible for a refund.
To get a clearer picture of how much you might get back, double-check your tax return and make sure everything is accurate. HMRC’s online tools or a tax pro can help you estimate your refund and make sure you stay compliant.
Do You Need an Accountant to Claim a CIS Refund?
While it’s possible to handle the process yourself, it may be helpful to hire an accountant, especially if your financial situation is complicated. An accountant ensures accuracy, helps maximize your refund, and can save you time. However, if your financial situation is straightforward, you may choose to file independently using HMRC’s resources.
Final Thoughts: Don’t Leave Your CIS Refund Unclaimed
If you’ve overpaid tax under the CIS, ensure you reclaim what’s rightfully yours. Keep thorough records, complete your tax return accurately, and seek professional advice if needed. Reclaiming your overpaid CIS tax ensures you’re not out of pocket for taxes you don’t owe.
Note: Tax regulations can change. Make sure to check the most recent guidance from HMRC or speak with a tax professional to stay compliant.
