CIS refunds: what subcontractors are owed

Under the Construction Industry Scheme, contractors deduct 20% from subcontractors' labour payments (30% if unverified) and pass it to HMRC as advance tax. The deduction ignores your personal allowance and your expenses — which is why, for most subbies, the year ends with HMRC owing you money, not the other way round.

Why the refund exists

A subcontractor grossing £35,000 in labour has £7,000 deducted at source. But the first £12,570 of profit is tax-free, expenses reduce the taxable profit further, and the tax actually due might be £3,500–£4,500. The difference — routinely £1,500 to £3,000 — comes back as a refund once the Self Assessment is filed. Materials you paid for, mileage between sites, tools, protective gear and phone all push the refund higher.

Claiming it properly

• Collect every CIS deduction statement (contractors must issue them monthly) — the refund is built from these
• Reconcile them against HMRC's records — mismatches are common and cost money if unchecked
• Claim all allowable expenses, not just the obvious ones
• File promptly after 6 April — refunds land in 2–6 weeks, and early filers beat the queue

Contractors have the opposite problem

If you engage subcontractors, you're the one who must verify them, deduct correctly, file a CIS300 by the 19th every month (£100 penalty per late month, per return), and issue statements. Miss a few months and penalties stack quickly. Our contractor CIS service runs the whole cycle from £30/month; subcontractor annual returns with refund claims are £149 fixed.