Claiming Your CIS Refund Through Self Assessment
For self-employed sub-contractors, a CIS refund claim and your Self Assessment tax return are one and the same process. When you complete your CIS self assessment tax return, you'll report your total CIS deductions suffered alongside your turnover and allowable expenses. HMRC then calculates whether the tax already deducted under CIS exceeds what you actually owe, and if so, the difference becomes your CIS tax rebate. If you're not sure where to start, our guide on how to fill in a Self Assessment tax return walks through the whole process step by step.
This is why keeping accurate, up-to-date records throughout the year matters so much. The more organised your figures are when you sit down to file, the smoother your CIS self assessment will be, and the faster HMRC can process your reclaim.
Making a CIS Repayment Claim
Construction subcontractors registered with the CIS have several means by which to file for a tax refund, including online through the HMRC portal, via the post, or directly through a bank or building society.
Note that limited companies aren't allowed to make CIS refund claims via their company tax return. Attempting to do so will subject the company to significant penalties. But that doesn't mean limited companies are frozen out of filing for a CIS tax refund, only that they'll need to make their refund claim through their company's monthly payroll scheme and not on their yearly tax return.
HMRC strongly recommends that subcontractors make refund claims online rather than through their bank. The online option typically results in a much faster repayment process. For the sake of thoroughness, we should also mention you can make a CIS tax refund claim via the post, although this is the slowest of all the repayment options.
CIS Refunds for Limited Companies
If you operate through a limited company, your route to a CIS refund looks a little different from a sole trader's. Rather than reclaiming through Self Assessment, limited companies offset the CIS deductions suffered by their subcontractors against their own PAYE, National Insurance, and CIS liabilities as an employer, reported through their monthly or quarterly Employer Payment Summary (EPS). It's also worth making sure you're using the right identifier at this stage, we've written about whether you can use your limited company UTR number for CIS payments if you want the full picture.
If, after offsetting throughout the year, there's still a balance owed to the company, you can claim this remaining amount back from HMRC at the end of the tax year. Getting this wrong, or attempting to claim through the company tax return instead, is one of the most common (and costly) mistakes limited company subcontractors make, so it's worth double-checking your figures or getting help before you submit.
Some Common Mistakes to Avoid When Claiming a CIS Tax Refund
Most errors on CIS tax refund claims fall into one of three categories:
- The subcontractor makes erroneous expense claims.
- They file their tax refund claim before the tax year ends on 5 April.
- A limited company attempts to claim a refund on their yearly company tax return.
In order to ensure they're making viable expense claims, it's recommended that subcontractors enlist the help of tax professionals when preparing their repayment claim. The Pie app is also a great way to keep all your relevant information organised so as to facilitate the refund claim process.
We mentioned it earlier but it bears repeating: limited company subcontractors must take pains to separate their CIS tax refund claim from their yearly tax return and instead make such claims through the mechanisms provided by the company's monthly payroll scheme, a mistake that's more common (and more costly) than you might think, as we cover in preventing penalties when filing limited company accounts vs self-employed returns.
