What you must do as a Construction Industry Scheme (CIS) subcontractor
Pay tax and claim back deductions
The deductions your contractor takes under the Construction Industry Scheme (CIS) are advance payments towards your tax.
You must tell HM Revenue and Customs (HMRC) about the deductions when you report your taxes. The way you do this is different, depending if you’re a sole trader or partner, or a limited company.
You’ll need the monthly payment and deduction statements your contractor has given you.
The way you pay tax is different if you have gross payment status.
If you’re a sole trader or partner
At the end of the tax year, send in your Self Assessment tax return as usual. You should record:
- your total pay before deductions were taken, as ‘income’
- the total deductions contractors have taken, as ‘CIS deductions’
HMRC will work out how much tax you owe and take off any deductions taken by contractors.
If you still owe tax after this, you’ll need to pay it by 31 January following the end of the tax year.
If you’re due a tax refund, HMRC will pay the money back.
If you stop trading
You may be able to get a refund of deductions you’ve already paid this tax year. Use the sole trader or partner form to make a claim.
If you’re a limited company
Use your company’s payroll scheme to pay tax with your deductions.
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Send your Full Payment Submission (FPS) as usual to HMRC.
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At the same time, send an Employer Payment Summary (EPS). Enter the total CIS deductions for the year to date.
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HMRC will take your CIS deductions off what you owe. Pay the balance by the usual date.
If there are deductions left over after you’ve paid your tax, you can carry these forward into the next period - as long as it’s still the same tax year. Tell HMRC in the EPS that you have nothing to pay.
If there are deductions left over after the end of the tax year, claim a refund.
Do not use your Corporation Tax return to pay tax with your deductions - you may get a penalty if you do.
Keep records
Your company must keep a record of the amount of CIS deductions you’ve used to pay your monthly or quarterly PAYE bill. You can use form CIS132 to do this.
You should also keep the monthly payment and deduction statements you get from contractors.
If HMRC thinks your claim is wrong
HMRC may ask you to give evidence of your CIS deductions or change your claim.
If you do not do this by the deadline they give you, HMRC will change your claim based on the information they have. You will not be able to make any more claims in that tax year.
You can appeal HMRC’s decision. They’ll tell you how to do this.
If your company stops trading
If you liquidate your company or it goes into administration, you can claim a refund of deductions taken that tax year.