Under the Construction Industry Scheme, 20% or 30% is taken off your payments before you see them. It is taken off your turnover, not your profit, and it takes no account of your personal allowance or a single one of your costs. That is why most subcontractors have overpaid by the end of the year.
When a contractor pays you, the deduction comes off the labour part of the payment and goes straight to HMRC. Gov.uk describes those deductions as advance payments towards your tax and National Insurance. They are your money, paid early, on your behalf.
The reason there is usually something to come back is arithmetic. The deduction is a flat percentage applied to a payment. Your actual tax bill is worked out on your profit after costs, and after your personal allowance. Three things pull in your favour:
You are not claiming a special CIS refund. You file a Self Assessment return, the deductions you suffered are set against the tax and Class 4 National Insurance you actually owe, and HMRC repays the excess. The CIS deductions go on the self-employment pages of the return. CIS 340 is emphatic they must never go on the employment pages, because CIS income is not employment income.
Refund companies advertise averages from their own books. We have not measured ours, so there is no average on this page. What decides it is specific to you:
A large refund every year is not a win. It means you have been lending HMRC money interest-free for up to twenty months. If you are labour-only and consistently in a repayment position, gross payment status stops the deduction happening at all, and you keep the cash through the year instead.
Refund firms usually charge a percentage of what they recover, and some take a deed of assignment so HMRC pays them and they pass on the balance. That is legal, but it means the refund is not paid to you and the arrangement can cover future years as well. Read what you are signing, check whether the fee is a percentage or a fixed amount, and check whether it covers the tax return itself or only the claim. HMRC publishes guidance on this at gov.uk.
What actually drives the number, and how to work out a rough figure from your own deduction statements.
Work it outTools, van, mileage, protective equipment, phone, insurance. What HMRC accepts and what it does not.
See the listWhy the money cannot come back before 6 April, and what actually happens after you file.
The timingsTwelve months to amend a return, four years for overpayment relief, and which one applies to you.
Going backA limited company cannot claim CIS on its corporation tax return. The offset runs monthly through the EPS instead.
How it worksSee what should have come off a given invoice once the materials split is applied properly.
Open the calculatorIn practice people use the words interchangeably, but there is no separate CIS refund process. You file a Self Assessment tax return, the CIS deductions you suffered during the year are treated as advance payments already made towards your income tax and Class 4 National Insurance, and HMRC repays whatever was taken beyond what you actually owed. So the refund comes out of filing the return correctly.
No. Nothing is repaid until a return is filed. HMRC holds the deductions your contractors reported, but it cannot know your costs, so it cannot calculate what you owe. If you do not file, the money simply stays with HMRC. This is why subcontractors who have stopped trading, or who moved onto PAYE mid-year, are the most likely to be owed something and the least likely to have claimed it.
Yes, and the refund will usually be larger, because 30% of your labour was taken instead of 20%. The higher rate applies when you are not registered under the scheme, or when the contractor could not verify you. It is worth finding out which, because the fix is normally administrative. If you were verified but the contractor used the wrong rate, the payment and deduction statement should carry the verification reference with a letter suffix, and that reference is the evidence of what happened.
You should have them, and you are entitled to them. A contractor must give a subcontractor a statement for each payment period within 14 days of the end of it. The statement shows the gross payment, the materials figure, the amount deducted and the verification reference where a higher-rate deduction was made. A bank receipt shows a net figure and nothing else, so it cannot tell you whether the deduction was calculated correctly. If statements are missing, ask the contractor first; HMRC can also confirm what was reported against your UTR.
Filing a correct return does not attract an enquiry by itself. What draws attention is a claim that is not supported by records — round-sum expenses, a mileage claim with no log, or costs that are private rather than business. Claim what you actually spent, keep the evidence, and the claim is straightforward.
There is no CIS deduction to reclaim, because nothing was deducted. You still file a Self Assessment return and you still deduct your costs, but you will normally be paying tax at the end of the year rather than receiving anything back. You held your own cash all year instead of lending it to HMRC.
Send us three months of payment and deduction statements. We will tell you whether the deductions were taken correctly, what is likely to come back, and whether you would pass the gross payment status tests.