Trades / CIS – Tax
CIS Refunds: The money most subcontractors leave with HMRC
Most subcontractors are owed money back from HMRC, and most never claim the full amount. Here is why it happens, how the refund is actually calculated, and how to get every pound of it.
Most CIS subcontractors are owed a refund, and most never claim the full amount. Contractors deduct 20% – or 30% if you are not registered – from your labour pay and send it straight to HMRC, but that flat deduction ignores your personal allowance and business expenses entirely. Once your actual tax and National Insurance are worked out through Self Assessment, the difference – often several hundred to a few thousand pounds – comes back to you. You can also claim for the previous four tax years if you have never checked.
At a glance
| Question | Short answer |
|---|---|
| Am I likely owed a refund? | If you’re a registered subcontractor having 20% deducted, yes – most are |
| Why does this happen? | The 20%/30% deduction does not account for your personal allowance or expenses |
| How do I get it? | File a Self Assessment return declaring income, CIS deductions, and expenses |
| Can I backdate a claim? | Yes – up to four previous tax years if you have never claimed |
| What increases my refund? | Every legitimate business expense you are currently not claiming |
Why are subcontractors usually owed a refund?
A blunt deduction taken before anyone knows your real tax bill
CIS deductions are a one-size-fits-all estimate taken before anyone knows your real tax position – and that estimate is almost always higher than what you actually owe once your allowance and expenses are factored in.
When you are a registered subcontractor, your contractor deducts 20% from your labour payments (30% if you are not CIS-registered) and pays it straight to HMRC on your behalf, every time you are paid. This deduction only applies to labour – materials you have invoiced separately are not subject to it. That 20% is simply an advance payment toward your eventual tax and Class 4 National Insurance bill, not a final calculation of what you owe.
The flat rate takes no account of two things that lower almost everyone’s actual liability: your personal allowance and your business expenses. Both reduce your real taxable profit, which means the amount actually owed to HMRC is very often less than what has already been deducted and paid over during the year. The gap between the two is your refund.
How is a CIS refund actually worked out?
Your refund is the gap between what was already deducted under CIS and what you actually owe once your real taxable profit – income minus allowable expenses minus your personal allowance – is calculated properly. Here is a realistic example for a registered subcontractor working through one main contractor over a full tax year:
This subcontractor had £8,400 taken across the year but only owed £6,224 – leaving a £2,176 refund sitting with HMRC.
The exact figures shift every year with allowance and rate changes, and this example assumes no other income sources – but the mechanics are the same for almost every registered subcontractor: deductions taken on the whole labour payment, real liability calculated after allowance and expenses, refund is the gap between the two.
Expenses that increase your refund
Every legitimate cost of doing the work counts
Every legitimate cost of doing your work reduces your taxable profit and directly increases your refund – and this is the single biggest reason subcontractors under-claim, because so many everyday costs go unrecorded.
| Expense category | What typically counts |
|---|---|
| Tools & equipment | Purchase, replacement, and repair costs |
| PPE & workwear | Boots, hi-vis, hard hats, branded or plain protective clothing |
| Vehicle & mileage | Actual running costs or the HMRC mileage rate, whichever applies |
| Insurance | Public liability and tool insurance |
| Phone & home admin | Phone costs and a reasonable share of use-of-home if you handle admin from home |
| Accountancy fees | Self Assessment filing and accountancy costs – genuinely deductible |
| Training & certification | CSCS card renewals and trade-relevant training |
None of these are unusual or aggressive claims – they are standard allowable expenses for a self-employed trade. The reason they get missed is not that subcontractors do not know expenses exist; it is that keeping receipts and records for a year of van fuel, replacement drill bits, and boot wear feels like more admin than it is worth, right up until the refund calculation shows what it actually cost to skip it.
What documents do you need?
| Document | What it’s for |
|---|---|
| CIS payment & deduction statements | Core evidence of gross payment, materials, and deductions already sent to HMRC |
| UTR & CIS registration details | Required to file your Self Assessment return |
| Bank statements for the tax year | Reconciling income and cross-checking expenses |
| Receipts or an expense log | Evidencing every claimed expense, or at minimum dates, amounts and purpose |
| Details of other income | Affects your overall tax position and which rate band applies |
Subcontractors who keep these organised as they go, rather than searching for a year of paperwork in January, consistently get faster refunds and fewer HMRC queries, since a claim backed by clean records rarely gets a second look.
How we claim it back in full
The most common way subcontractors leave money with HMRC is not failing to file a return at all – it is filing one that only claims the expenses that were easy to remember, rather than everything they were actually entitled to. A generalist accountant who handles the odd CIS return once or twice a year often does not dig into the full expense picture the way a specialist does. Our trades and CIS accounting team works with subcontractors specifically, which means we know the expense categories most self-filed and generalist-handled returns under-claim, and we check whether you are owed anything from the previous four tax years while we are at it – a step that is easy to miss if nobody asks.
Frequently asked questions
How do I know if I’m owed a CIS refund?
If you are a registered subcontractor having 20% deducted from your labour payments, and you have any legitimate business expenses or have not used your full personal allowance elsewhere, you are very likely owed something back. The only way to know the exact figure is to run the calculation through a Self Assessment return.
How far back can I claim a CIS refund?
You can claim for the previous four tax years if you have never checked or filed for a refund before. Each year is calculated separately using that year’s rates, allowances, and your CIS statements for that period.
How long does a CIS refund take once I file?
HMRC typically processes refunds within a few weeks of a correctly filed return, though timing varies, and a return with clean, well-evidenced records is generally processed faster and with fewer follow-up queries than one that isn’t.
What if I haven’t kept my CIS statements?
Your contractors are required to provide them, and duplicates can usually be requested if any are missing. It is still worth building a habit of keeping every statement going forward, since chasing months of missing paperwork is the single biggest delay we see in getting a claim filed.
Do I still get a refund if I have gross payment status?
If you have gross payment status, no CIS deductions are taken from your pay in the first place, so there is no CIS refund mechanism to claim through – though you may still be able to reduce your overall tax bill through the same expense claims.
Find out what you’re owed
If you’ve never had a proper CIS review, or you suspect your last return only scratched the surface of what you could claim, it’s worth checking before you assume the figure isn’t worth chasing.
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