Directory of cis tax refunds and repairs

Author: Lily William

If you are self-employed, work regularly as a subcontractor, and are registered with the Construction Industry Scheme (CIS), your tax will be deducted at the point of payment into your account and paid directly to HMRC by the contractor for whom you work. By submitting a Self Assessment Tax Return, HMRC will determine whether you have underpaid or overpaid tax through your CIS payments and whether you are eligible for a tax rebate.

Here, we examine how self-employed subcontractors who are members of the Construction Industry Scheme (CIS) can obtain tax refunds and repayments, how this works for sole traders and limited companies, and how long it may take to receive your money back from HMRC.

How much tax will I be required to pay under CIS?

If you are hired by a contractor to perform construction work for them, the contractor will deduct tax from your payment and forward it to HMRC. For subcontractors, this entails paying a tax rate of 20% to 30%, unless they are exempt due to their gross payment status.

This payment in advance to HMRC frequently results in subcontractors being entitled to a tax rebate or refund when it comes time to file their annual accounts.

When a subcontractor submits an invoice, they will separate the costs of materials and supplies from the labor costs. These materials will be tax-exempt.

Is it possible for me to receive a CIS Tax Refund or Tax Rebate?

If your annual tax and National Insurance calculations reveal that you overpaid through CIS payments, you may be eligible for a CIS tax refund or repayment.

The process of claiming a CIS repayment can be relatively straightforward for sole traders who complete a self-assessment. The following are the critical points to remember:

  • The deadline for filing your tax return each year is January 31st.

  • Along with your expenses, you should include details of all your regular and subcontracted work, and HMRC will calculate your tax and National Insurance.

  • If you are eligible for a CIS tax rebate, you will receive it automatically.

  • You submit your self-assessment tax return via the government portal, whether you do it yourself or through a cheap contractor accountant in London.

How long does it take to receive a CIS refund?

If you are a sole trader and qualify for a CIS tax rebate, HMRC should process your claim within 1 to 8 weeks. Our clients are typically paid their CIS tax rebates within ten days of submitting their Self Assessment Tax Return.

The time required to process a refund directly with HMRC varies depending on the circumstances. HMRC states that they will process your application within 40 working days, but this time frame can vary from one to eight weeks depending on the time of year.

How does the CIS payment system work?

CIS is applicable to sole traders, corporations, and partnerships engaged in construction work. Contractors are required to register for the scheme, and subcontractors are strongly encouraged to do so as well.

After receiving payment for any work performed by a subcontractor, the contractor will calculate the tax due to HMRC using the following formula:

  • If the subcontractor is a CIS member, the tax rate is 20%.

  • The tax rate is 30% if the subcontractor is not registered with CIS.

  • Certain subcontractors qualify for an exemption if they are paid on a gross basis.

  • The contractor's tax does not include any earnings outside of the contract or the final return for an individual or business acting as a subcontractor. Your eligibility for a CIS tax refund is determined by the outcome of your final self-assessment tax return.