CIS: registration, returns and the refund you're probably owed

Under the Construction Industry Scheme contractors deduct 20% from your labour before paying you — 30% if you are not registered. Because that deduction ignores your expenses and your £12,570 personal allowance, most subcontractors have overpaid by the end of the tax year and get a refund when the return is filed.

Contractors deduct 20% — or 30% if you are not registered — from your labour before you see it. That deduction ignores your expenses and your tax-free allowance entirely, which is why most subcontractors have overpaid by the time April arrives.

How CIS actually works

Under the Construction Industry Scheme the contractor who pays you also withholds tax from you and sends it to HMRC. You are still self-employed; you still file your own return. The deduction is simply money paid towards your bill in advance.

Two things follow from that, and between them they explain almost every CIS refund:

• It is taken from your labour, not your profit. Your van, tools, fuel, insurance and materials have not been considered at all.
• It ignores your personal allowance. The first £12,570 of your income is not taxable, but 20% still came off it.

Deduct the expenses and apply the allowance at the end of the year, and the correct figure is often well below what has already gone. The return is what brings the difference back.

Estimate yours

Rough numbers in thirty seconds — gross paid by contractors, and what you have spent on the work:

Registering as a CIS subcontractor

Register before you take on work, not after the first payslip. Unregistered subcontractors are deducted at 30% rather than 20% — the money is not lost, but you are lending HMRC an extra tenth of your labour until the return.

1. Register as self-employed if you have not already. This is what produces your Unique Taxpayer Reference.
2. Register under CIS as a subcontractor, with the same UTR and your National Insurance number.
3. Give each contractor exactly the details you registered with. A name that does not match is the usual reason verification fails and 30% starts coming off.
4. Keep every payment and deduction statement. Contractors must give you one; without them, proving what was deducted becomes your problem.

What you can claim

Not an exhaustive list, but it covers most of what subcontractors actually spend money on:

• Tools, equipment and protective clothing
• Materials you bought yourself and were not reimbursed for
• Van running costs, or mileage where you use your own vehicle
• Public liability and tool insurance
• The business share of your phone
• Trade subscriptions, certification and training that maintains your qualifications
• Accountancy fees
• The proportion of home costs attributable to running the business

What we will not do is invent them. Inflated expense claims are the fastest route to a compliance check, and the arithmetic is against you: a claim that saves a few hundred pounds is not worth an enquiry that opens six years of records.

Gross payment status

With gross payment status contractors pay you in full and you settle your own tax later. For anyone with staff, materials or a subcontractor chain of their own, it is the difference between a business that funds itself and one that waits on HMRC.

To qualify you must pass three tests: business (you genuinely run a construction business with a UK bank account), turnover (excluding VAT and materials: £30,000 for a sole trader, or £30,000 per partner or director — or £100,000 for the business as a whole), and compliance (returns and payments up to date).

The compliance test is the one that bites. HMRC reviews the status periodically and can withdraw it, so late returns after you have been granted it are expensive in a way they were not before.

If you also pay subcontractors

Then you are a contractor as well, and a monthly obligation attaches: verify each subcontractor with HMRC before the first payment, deduct at the verified rate, file a CIS return by the 19th of every month, and give each subcontractor a deduction statement. Penalties for late monthly returns start immediately and escalate — and unlike the annual return, there is no quiet period in which to catch up.

Dates that matter

• 5 October — deadline to register for Self Assessment after your first tax year of trading.
• 31 January — online return and any balancing payment.
• 31 July — second payment on account, where you make them.
• 19th of every month — monthly CIS return, if you pay subcontractors.
• Early April — the practical one. File as soon as the tax year ends and the refund arrives while the queue is short.

What we do

• CIS registration, and fixing verification failures that push you to 30%
• The CIS tax return, with every allowable expense taken properly
• Chasing missing deduction statements from contractors
• Gross payment status applications, and keeping the compliance test passed
• Monthly CIS returns where you pay subcontractors of your own
• Year-round bookkeeping, so April is a formality rather than a search through the van

Fixed fee, agreed in writing before any work starts. You keep 100% of your refund — we are not a rebate firm and we never take a share of it.

Figures are for the tax year shown and change every April. They are general information, not advice — we check the current position for your circumstances before anything is filed.

Reviewed 19 October 2026.