The Construction Industry Scheme (CIS) is a tax scheme in the UK that applies to contractors and subcontractors in the construction industry. If you’re a subcontractor, tax and National Insurance contributions (NICs) may have been deducted from your payments. But, if too much tax has been taken, you might be eligible for a refund. Both individual and company subcontractors can claim this refund, but they must meet certain conditions and follow the correct process.
Who Can Claim a CIS Refund?
If you’re a subcontractor under the CIS, you can claim a refund if your deductions exceed your tax liability. This applies to both self-employed subcontractors (sole traders) and companies registered under the scheme.
Individual Subcontractors (Self-employed/Sole Traders)
Self-employed subcontractors, such as sole traders, who are registered under the CIS can claim a refund of any excess tax or National Insurance that has been deducted from their payments.
Company Subcontractors (Limited Companies)
If you run a limited company and are working as a subcontractor, you can also claim back CIS deductions that exceed your tax liability. The company will need to file Corporation Tax Returns and provide necessary documentation.
Eligibility Criteria for Claiming a CIS Refund
To ensure you’re eligible for a CIS refund, both individuals and companies need to meet specific conditions, including having the correct documentation and registration.
Individual Subcontractors:
To be eligible for a CIS refund as an individual:
- Registration is beneficial but not mandatory: While registration is not required, it reduces deductions from 30% to 20%. If you are not registered, your deductions will be at the higher rate, but you can still claim a refund if you’ve overpaid.
- Tax Liability: Your total tax liability for the year must be lower than the amount deducted by your contractors.
- Tax Returns and Obligations: You must have filed your Self-Assessment tax returns and met all HMRC obligations.
Company Subcontractors:
To claim a CIS refund for your company:
- Your company must file Corporation Tax Returns and provide detailed records of your CIS deductions.
- You will need to provide CIS statements and PAYE records.
Both individuals and companies should check their CIS deductions and any business expenses to confirm they are eligible for a refund.
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Book an AppointmentWhatsApp UsWhat Documentation Will You Need to Claim Your CIS Refund?
The required documentation is essential for supporting your claim and ensuring the process goes smoothly.
Documents for Individuals:
- CIS Statements: Documents that show deductions made by contractors.
- Invoices: For any subcontracted work.
- Tax Returns: Self-Assessment Tax Return.
- Proof of Expenses: Any expenses related to running your business.
- Identification Documents: Documents such as your passport or driver’s license.
Documents for Companies:
- CIS Statements: Showing deductions made by contractors.
- Corporation Tax Returns: Required to file your claim.
- Payroll and Business Expenses Records: To verify your company’s expenses.
- Company Registration Documents: Along with the Unique Taxpayer Reference (UTR) for the business.
- Bank Statements: Support your claims by verifying payments received and ensuring consistency in financial records.
- Payment and Deduction Statements (PDS): Provide detailed records of CIS deductions, offering additional verification for your financial claims.
How Individual Subcontractors Can Claim Their CIS Refund
To claim a refund, individual subcontractors must start by filing their Self-Assessment Tax Return through HMRC’s online platform. Make sure to include all relevant details about your income and expenses. Once you’ve completed the return, keep your CIS statements and any supporting documents like invoices and receipts for business expenses in case HMRC requests them. These documents are not directly attached to the return but should be readily available for verification if needed
You can submit your claim online via HMRC’s website or by post by sending a written request marked as ‘CIS’ to HMRC. Double-check all details before submitting to ensure there are no errors. If HMRC contacts you for additional information, make sure to respond quickly and provide any necessary documents.
How Company Subcontractors Can Claim Their CIS Refund
Company subcontractors must reclaim CIS deductions through their monthly payroll scheme by offsetting them against PAYE and National Insurance contributions, not through the Corporation Tax Return. Keep CIS statements from contractors in case HMRC requests them. Submit your Full Payment Submission (FPS) and Employer Payment Summary (EPS) each month to HMRC, detailing any CIS deductions claimed. Be prepared for possible follow-up inquiries from HMRC. If they request additional information or documents, ensure you provide them as needed to avoid delays.
What Expenses Can You Claim Back Through CIS?
Subcontractors can claim back overpaid tax or National Insurance, along with specific business-related expenses.
Individual Subcontractors: Individual subcontractors can claim back overpaid tax and National Insurance, and they can also claim for allowable business expenses such as travel, vehicle-related expenses, and tools or equipment used for their work. Expenses like these can help reduce your taxable income and increase your refund.
Company Subcontractors: For company subcontractors, CIS refunds are processed through Corporation Tax returns. Businesses can claim back expenses that directly relate to their operations, like travel, accommodation, and equipment costs. These expenses help lower the taxable income of the business, which in turn affects the refund amount.
Commonly Claimed Expenses: Travel, accommodation, equipment, and business vehicle-related costs are some of the most common business expenses that subcontractors can claim back.
How Long Does it Take to Receive a CIS Refund?
The time it takes to process your refund can vary depending on whether you’re filing as an individual or a company. If you’re an individual and file your claim online, refunds typically take 10 to 14 days to process. But, for company claims, the process may take longer due to the additional paperwork involved in filing Corporation Tax returns.
Our Tips to Maximise Your CIS Refund and Stay Organised
Stay proactive in preparing your claim and keep accurate records to avoid issues down the line.
- For Individuals: Keep up with your tax filings and record-keeping to ensure a smooth refund process. Plan ahead and track all business expenses throughout the year.
- For Companies: Understand how to handle your CIS refunds through Corporation Tax filings and maintain clear, accurate business records.
- Proactive Planning for Future Claims: Start tracking your expenses and deductions early to make the claims process easier.
- Seek Professional Advice: If you’re unsure about any aspect of your claim, seeking professional help can save time and ensure that your refund claim is accurate.
Claiming a CIS refund can help subcontractors recover overpaid tax or National Insurance. Whether you’re an individual or a company, it’s important to ensure you meet the eligibility requirements, have all the necessary documentation, and follow the correct steps for filing your claim. Seeking professional advice can help avoid errors and maximise your refund.
If you’re looking for assistance with your CIS refund claim or comprehensive accountancy services, contact Swiftacc for expert support and advice.
