How to claim a Construction Industry Scheme (CIS) refund

Many subcontractors and tradespeople pay tax on their earnings through the Construction Industry Scheme (CIS). This is when your employer, or contractor, withholds a percentage of your income, or invoice amount as tax, before paying the net over to you.

what is CIS?

The Construction Industry Scheme (CIS) was first introduced in the 70’s as a way of minimising missed tax payments in the construction industry. Under the scheme a contractor must deduct 20% from a subcontractors payment, and give it to HMRC . It then works towards your national insurance contribution.

Do I have to register for CIS?

The short answer is yes. If you are a CIS eligible subcontractor then you are required to to register. If you don't, then rather than deducting 20% from your payment, the contractor is required to deduct 30%. Remember you do not have to register for CIS if you are an employee, only if you are a subcontractor. 

However you can elect to opt out of these deductions and apply for “Gross Payment Status” meaning that you receive all of your subcontractor income gross, meaning that you pay all of your income tax and national insurance at the end of the tax year, in your Self-Assessment Tax Return. But remember, if you opt for gross payment status, then you will be subjected to an annual review to see if your business is still suitable.

What happens if I pay too much tax through CIS?

Even though you are paying tax through CIS, you are still responsible for letting HMRC know the correct amount of Income Tax and National Insurance that you need to pay. Any contractors you work for should send you a monthly statement, showing all the deductions made on your invoices.

As it happens, the majority of CIS registered subcontractors do end up overpaying, and so understandably will be keen to get this overpayment back. This is done through your Self-Assessment tax return and this is where APARI can help. 

Keeping good, up to date records in APARI, means that you will be able to submit your Self-Assessment as soon as possible after the tax year ends. By going through APARI’s SA100 route, you will be able to include the details of any CIS deductions made during the year, and this will be contra’d off your tax bill. 

And so the quicker you submit your tax return, the quicker you will get your refund, or reduction in your tax liability.

Want to know more about self-assessment? We created the Ultimate Guide to Self-Assessment Tax Returns for YOU!