CIS refunds: how subcontractors claim back overpaid tax

Most CIS subcontractors are owed money back, because the 20% deduction is taken from gross labour before expenses and personal allowance. Sole traders get the refund by filing a Self Assessment tax return. Limited companies set deductions against their PAYE bill during the year and claim any unused amount from HMRC after 5 April.

Why do CIS subcontractors overpay tax?

The deduction is a flat advance payment, not a calculation of what you owe. Contractors take 20% from registered subcontractors and 30% from unregistered ones, as GOV.UK’s subcontractor guidance explains.

Under HMRC’s rules on making deductions, the contractor first removes VAT, materials you bought, hired equipment for the job and fuel other than for travel. The deduction then falls on the labour element. It ignores your van, tools, phone, mileage and the £12,570 personal allowance, so your real bill is often lower.

Worked example for 2026/27

This assumes no other income and rates for England, Wales and Northern Ireland. Try your own figures in the self-employed take-home calculator.

How do sole traders claim a CIS refund?

You claim through your Self Assessment tax return after the tax year ends. The steps are:

1. Collect your payment and deduction statements. Contractors must give one within 14 days of the end of each tax month, for example by 19 June for the month to 5 June.
2. Add up gross pay and deductions. Use the statements for 6 April to 5 April.
3. Record your expenses. Keep receipts for materials you bought, tools, vehicle costs and other allowable costs. See sole trader expenses.
4. File your return. Enter total pay before deductions as income and the total taken as “CIS deductions” on the self-employment pages. Our guide to filing a Self Assessment return walks through it.
5. Wait for HMRC to repay. HMRC sets the deductions against your bill and pays back any excess.

You can file a 2025/26 return now; there is no need to wait until the 31 January 2027 deadline. Filing early means an earlier refund.

What if you stop trading?

If you stop trading part way through a tax year, you can claim deductions already paid in that year without waiting. Sole traders use form CIS40 and partners use form CIS41. CIS40 can be sent online, which gives a reference number to track the claim, or printed and posted.

How do limited companies claim a CIS refund?

Limited companies use their payroll scheme, not the Corporation Tax return. GOV.UK warns that claiming deductions through the CT600 may lead to a penalty.

1. Each month, send your Full Payment Submission as usual.
2. Send an Employer Payment Summary showing CIS deductions suffered in the year to date. HMRC sets them against PAYE, National Insurance and other payroll amounts.
3. Carry forward any unused deductions within the same tax year, telling HMRC on the EPS that nothing is payable.
4. Keep a record on form CIS132 of amounts set off, with your monthly statements.
5. After 5 April, claim the balance using HMRC’s limited company repayment claim.

What the company needs before claiming

HMRC’s guidance, updated 25 August 2026, says the company must have sent all FPS and EPS returns, any monthly CIS returns if it is also a contractor, and its Company Tax Returns. The claim needs:

• the overpayment amount, which is total CIS deductions minus deductions already used (an estimate is accepted)
• company name, phone number, address, PAYE reference and Corporation Tax UTR
• bank account details for the repayment
• form R38 or a signed authority if the money should go to an agent or nominee

Online claims cover the past 6 tax years; older years must be claimed by post to PT Operations North East England, HM Revenue and Customs, BX9 1BX, with “CIS” on the envelope. You can also ask HMRC to use the refund to pay Corporation Tax or VAT.

A company can claim during the current tax year only if it has stopped trading or had deductions taken after moving to gross payment status. It must then send copies of all payment and deduction statements and bank statements for the year.

Why might a refund be delayed?

HMRC checks your figures against what contractors have reported. If they do not match, it may ask for statements and bank records. It also uses deductions first to clear any overdue PAYE or Corporation Tax.

HMRC usually replies to company claims within 8 weeks. If you are chasing a payment, our page on the HMRC CIS helpline has the numbers and opening hours.

What to do now

• Sole traders: file your 2025/26 return as soon as your statements are complete.
• Companies: check that EPS figures match your statements before claiming.
• Everyone: ask contractors for any missing monthly statements now.
• From April 2027: check whether Making Tax Digital for CIS subcontractors applies to you, and read our CIS guide for subcontractors.

Frequently asked questions

How long does a CIS refund take?

HMRC usually responds to limited company claims within 8 weeks. Sole traders are repaid after HMRC processes their Self Assessment return, so filing early speeds it up.

Can I claim a CIS refund before the end of the tax year?

Only in limited cases. Sole traders and partners who stop trading can use CIS40 or CIS41, and companies can claim early if they stopped trading or moved to gross payment status.

How many years back can a limited company claim CIS deductions?

Online claims cover the past 6 tax years. Older years must be claimed by letter to HMRC.

Can a limited company claim CIS deductions on its Corporation Tax return?

No. Companies must offset deductions through the EPS and claim any balance through HMRC’s repayment claim. GOV.UK says using the CT600 may lead to a penalty.

What if my contractor did not give me a deduction statement?

Ask them for it. Contractors must give a payment and deduction statement within 14 days of the end of each tax month, and HMRC compares your claim with what they report.