10 Mar 2025
A Guide to CIS Tax Refunds
Since the 1970s, the Construction Industry Scheme, commonly known as CIS, has been a tax scheme that has policed the construction industry. Originally designed to ensure tax compliance, it is now a mandatory tax scheme in the UK construction sector.
Primarily, it helps subcontractors who work or contractors within the industry, providing clear and transparent rules for how taxes are deducted from their pay. At Contractwise, we’re leading HMRC legislation and CIS experts who help those in the industry in a range of areas. This includes:
If you’re one of the many tradespeople operating under CIS, there may be occasions when you’re entitled to a CIS tax refund. In this article, we’ll provide you with a comprehensive guide explaining what a CIS tax rebate is, who can claim it, how to do so and other essential details that can help you better understand your entitlements.
Read on for more.
What is a CIS tax rebate?
A CIS tax rebate, or CIS tax refund, refers to the refund that can be claimed on overpaid tax. Under the rules of CIS, contractors are required to deduct tax from the payments they make to subcontractors following work. This is done at varying rates depending on the subcontractor’s registration status with HMRC (HM Revenue and Customs).
The deducted tax is directly paid to HMRC on behalf of the subcontractor, and it serves as a form of advance payment towards a subcontractor’s final tax bill. However, there are some circumstances when subcontractors end up overpaying. This is more common than you may think and is more likely to happen if they’re not working regularly or earning large sums within the tax year. In these cases, subcontractors may be eligible for a refund on the overpaid tax - this is known as a CIS tax rebate.
It’s important to note that this tax isn’t always a burden for subcontractors because the system will ensure that tax obligations are covered in advance. However, when a subcontractor has earned less or has seen expenses deducted from tax payments, a refund is a way to ensure they have not been taxed unfairly.
What can a CIS tax rebate cover?
A CIS tax rebate doesn’t always just cover the tax deducted under the scheme; it can help cover other associated costs, too.
For example:
Tax overpayments: If too much tax has been deducted from your payments, a rebate can cover the excess. Subcontractors can often have tax deducted at a higher rate than necessary, especially if they are not registered with the scheme or the wrong rate has been applied.
Business expenses: Subcontractors are typically allowed to deduct legitimate business expenses, such as materials, tools and travel costs, from their taxable income. If these expenses have not been accounted for when the tax is deducted, a rebate can help reclaim these overpaid taxes once the subcontractor has filed their return.
Overall, the key point to remember is that the rebate allows you to adjust any discrepancies in the tax you paid versus the tax you owed.
Who can claim a CIS tax refund?
Not everyone in the construction industry will be eligible for a CIS tax refund. To be eligible for a CIS tax rebate, certain criteria need to be met. Those who can claim a refund include:
Subcontractors under CIS: If you’re a subcontractor working under the Construction Industry Scheme, and tax has been deducted from your payments by contractors, you might be eligible for a refund. Subcontractors are people who work in a variety of roles, including the likes of builders, plumbers, electricians and those in many other professions. Usually, subcontractors work in more specialised fields.
Self-employed or sole traders: Usually, subcontractors will be self-employed and are generally the ones who will claim a rebate. If you work through a limited company, you may still be eligible, but it’s less likely that you have overpaid your tax.
Tax overpaid: To qualify for a CIS refund, you will have had to have overpaid tax under the scheme. This can happen if the wrong tax rate was applied if you didn’t register with HMRC as a subcontractor or if your income was lower than expected.
Sometimes, subcontractors will wrongly assume they are not eligible for a tax refund because they are self-employed or simply unaware of how the tax is deducted. However, as long as the criteria are met, any subcontractor can claim the rebate.
How to claim a CIS tax refund
Claiming a CIS tax refund is a straightforward process, but it’s essential to follow the right steps to ensure your claim is processed properly and as efficiently as possible. Here’s a step-by-step guide on how to make a claim:
Check Eligibility
Before you begin, you should make sure you are eligible for a CIS tax refund. As mentioned throughout this article, you need to be a subcontractor who is registered under CIS and whose tax liability for the financial year has been overpaid.
If you are eligible, you will also need to have correctly filed your tax returns during the year as set out by HMRC. You cannot get a refund if you are not registered as a subcontractor with HMRC under the CIS scheme. It is easy to register with HMRC, and it can be done online or by post. Registration allows you to avoid being taxed at the higher 30% rate and ensure your deductions are made at the correct rate.
Keep your records in order
Having accurate records is crucial when making a CIS refund claim. You need to make sure to document every payment you have received, the tax that was deducted and any allowable business expenses that have been deducted during the year.
Some of the documents you may need include:
CIS statements: These outline the payments and deductions made under the scheme.
Invoices and receipts: Keep a record of all the construction work you’ve carried out, including invoices and receipts.
Payroll records: If you’re a subcontractor who employs others, you should ensure all payroll records are up-to-date and in order.
Proof of identity: You may need to validate your identity, so ensure you have an ID to hand in case HMRC ask for it.
When making a claim, you will also need other details such as:
If you operate a limited company, include its address, company name and phone number
Your PAYE reference number
The company's unique tax reference
The estimated overpayment amount
Complete a self-assessment tax return
In order to claim a refund, a self-assessment tax return needs to be filed with HMRC. This can be done online using the Government Gateway or by post.
On this return, you will need to report your earnings, tax deductions and allowable expenses for the year. If you have overpaid your taxes as part of CIS, the self-assessment process will allow you to request a refund. Make sure to submit your tax return before the deadline to avoid being fined.
Before completing this form, you should make sure you have accurately worked out how much you are owed.
Double check everything
Before submission, make sure you take the time to double-check every aspect of the claim. Doing something wrong will delay the process and make it more complicated, so getting everything right the first time is much more convenient.
Submit your claim
Once you have double-checked the claim, you can submit your tax return. Then, HMRC will begin processing the claim.
If you are due a refund, they’ll arrange for this to be paid back to you.
Consider professional help
Completing a CIS tax rebate can be challenging, so you may want to consider enlisting the assistance of a tax professional or CIS expert - such as Contractwise. We will help ensure your claim is accurate and processed as quickly as possible, ensuring everything is accounted for and your refund is maximised.
How long does it take to get a CIS tax refund?
Generally, it can take between six to 12 weeks for a CIS refund to be processed. The timeline will vary significantly depending on the complexity of your claim and how busy HMRC at the time they receive it.
However, if you have filed your tax return correctly and on time, you may discover that your refund is made sooner than this period. This is much more likely to be the case if there are no issues with your claim.
Any delays or complications, such as missing information or incorrect details, could cause the process to take longer. In such cases, HMRC may contact you for additional information. You can keep track of your claim’s status on the HMRC website or app.
A CIS tax refund can provide vital financial relief for subcontractors in the construction industry. Whether you’ve overpaid tax or have incurred legitimate business expenses, it is your right as a subcontractor to apply for a refund. To make sure claims and all your CIS needs are handled professionally, contact Contractwise today.