How To Claim a CIS Refund

by Jun 28, 2022Uncategorized

Working in the construction industry isn’t an easy task, especially when you have to navigate the intricacies of the construction industry scheme (CIS).

If you’re registered with CIS, you’ll already be paying 20% tax, rather than 30% if you aren’t. But, a third of construction workers still end up paying too much tax, which equates to an estimated £80 million each year.

That’s a lot of hard-earned money being lost to HMRC.

If you’ve worked across two or more construction sites in the last four years, or had to take public transport to get to work, you could very well be entitled to a CIS tax refund.

Knowing how to claim for a CIS refund may not be apparent. Here’s how to find out if you’re owed some money.

How do you claim your CIS refund?

The way you claim for a refund varies depending on how you operate as a construction worker.

There are different rules for sole traders and partnerships, and a separate set of rules for limited companies.

The one thing they all have in common is that you must include any invoices and income or CIS deductions in the tax returns you file with HMRC.

Even though it sounds complicated, you don’t need to worry. Everything you need to know is included in this post.

Sole traders and partnerships

Sole traders and partnerships are required to submit self-assessment tax returns to HMRC.

In these returns, you must outline all invoices and income in the CIS deductions field. Any deductions a contractor has made must be included in this area as well.

The tax agency will calculate your tax and national insurance and subtract any deductions your contractor has made. If you’ve overpaid, HMRC will issue you a refund.

Be sure to keep copies of your expenses and bank statements. By downloading a copy of your statements, you’re making sure you have the proof you need of your CIS payments.

Limited companies

CIS refunds for limited companies work a little differently. For limited companies with a gross payment status, they need to file a corporation tax return and declare all of their income.

If you work for your own limited company and carry out the work for the contractor yourself, they’ll make CIS deductions before paying your company.

They will also file a monthly report to HMRC to show the deductions made.

This is when you’ll include the CIS deductions on your employer payment summary (EPS) to HMRC as part of your payroll process.

At the end of the year, you’ll submit your final payroll submission (FPS) to HMRC, and complete an online application. HMRC will then offset any CIS deductions against your corporation tax.

Any CIS credit left over will be refunded to your company.

If there are any unpaid CIS deductions from your PAYE bill, they’ll be transferred either to the next month or quarter for that tax year. As well as this, you need to inform HMRC that you don’t owe any more money.

Don’t lose out

The last thing you want is to lose your hard-earned money to the taxman.

By getting in touch with the expert team at Diamond Accounts, you won’t need to worry about getting short-changed.

Contact us today.

Want to talk instead?

We get it. At Diamond, we're talkers, too. If you've got a question about accountancy or want to explore an business idea with one of our expert advisers, call, email or message us now.