CIS refund for a limited company: how to claim your CIS tax back

By Hussein Bhaiji FCCA CTA, Managing Partner. Last reviewed: October 2026.

Want your CIS deductions offset every month and claimed back correctly? See our Construction Industry Scheme service.

Your company has had 20% taken off every labour invoice all year. That money is yours, it is sitting with HMRC, and a limited company gets its CIS refund by a completely different route from a sole trader. Using the wrong route is one of the most common reasons claims stall. Here is how to claim your CIS tax back, and why so many companies wait months for it.

How much CIS tax is deducted in the first place?

Contractors deduct at one of three rates:

20% if you are registered with HMRC as a subcontractor and the contractor can verify you
30% if you are not registered, or HMRC cannot match your details
0% if you hold gross payment status

The deduction is not limited to the hours you bill. It applies to the whole payment after certain items are taken out, so travel, subsistence and any mark-up on materials are all subject to it. Materials you paid for directly, hired plant, fuel used on site, consumables and VAT all come out of the figure first.

Warning

That 30% rate is not a penalty you can argue about after the event. If a contractor verifies you and HMRC cannot match your company to its records, 30% applies. On £150,000 of labour that is £45,000 held by HMRC instead of £30,000: £15,000 more of your cash tied up until you offset it or claim it back. Check your company is correctly registered as a subcontractor before you invoice, not after.

Why can’t a company just claim it on the Corporation Tax return?

Because it is the wrong route, and HMRC may charge a penalty if you use it.

CIS deductions suffered by a limited company are treated as paid on account of its liabilities as an employer and contractor (section 62(3) and (4) FA 2004 and regulation 56 of SI 2005/2045). If the company runs a PAYE scheme, they are set against its payroll liabilities during the year and any balance is claimed back once the tax year ends. A company with no PAYE scheme still needs one to recover its deductions: HMRC’s repayment claim asks for the company’s PAYE reference and checks the claim against the EPS, so register as an employer and file an EPS showing the deductions. HMRC states plainly that you should not claim them through the Corporation Tax return and that you may get a penalty if you do.

This trips up a surprising number of businesses whose accountant treats the company like a sole trader.

How to offset CIS deductions against PAYE through the EPS

You reclaim through the Employer Payment Summary, or EPS.

Run payroll and file your Full Payment Submission (FPS) as normal.
File an EPS showing the total CIS deductions suffered for the year to date. It is a cumulative figure, not that month’s deductions, and entering the monthly figure is a frequent cause of mismatches.
HMRC sets the deductions against what you owe on the PAYE scheme. Pay only the balance.
Anything left over carries forward to the next month or quarter within the same tax year.

The EPS is not the monthly CIS return (CIS300). Your company files a CIS300 only if it also pays subcontractors itself.

The EPS deadline is the 19th of the following tax month.

The set-off runs in a fixed order under regulation 56(2) of SI 2005/2045: employees’ and employer’s Class 1 National Insurance, then PAYE tax, then student loan repayments, then any CIS deductions you owe on your own subcontractors.

Example

Aztec Interiors Ltd suffers £4,000 of CIS deductions in the first tax month (6 April to 5 May) and owes £1,500 of PAYE and National Insurance for its two employees. It files an EPS showing £4,000 year to date, pays nothing across to HMRC that month, and carries the remaining £2,500 forward. The same happens every month: £4,000 deducted, £1,500 of PAYE and National Insurance due. Aztec pays HMRC nothing all year, and by 5 April it has £30,000 left over (£48,000 of deductions less £18,000 of PAYE and National Insurance), which it claims back once the tax year ends.

Claiming a CIS repayment at the end of the year

Anything you have not absorbed through payroll is repaid after the tax year ends. You claim online, signing in with the details linked to the company’s Corporation Tax and PAYE accounts, or by letter. Claims for the last six tax years can be made either way; older years must be claimed by post.

Before HMRC will pay:

the tax year must have ended, unless the company has stopped trading or has had deductions taken after moving to gross payment status, and
the company must have submitted all its FPS and EPS returns, any monthly CIS returns it owes as a contractor, and its Corporation Tax returns.

HMRC will first use the excess to clear any overdue PAYE or Corporation Tax (s62(3) FA 2004; reg 56(3) and (6) SI 2005/2045). You can then have the balance repaid, or ask HMRC to use it against your VAT or upcoming Corporation Tax.

Note

Your contractors’ returns for the last tax month (6 March to 5 April) are due by 19 April. HMRC checks your claim against what they report, so a claim made before then is more likely to be held.

Why do these claims get delayed?

In our experience, and as HMRC’s guidance and manuals confirm, claims are usually held up for one of four reasons:

Returns outstanding. Every relevant PAYE, CIS and Corporation Tax return has to be in. One missing return holds the whole claim. If your company is also registered as a contractor, that includes a nil CIS return for any month in which it paid no subcontractors, unless you have told HMRC it is inactive.

The EPS figure exceeds what HMRC’s system shows. This usually means a contractor has not filed its monthly return, or your company is not registered as a subcontractor. HMRC will then ask for every payment and deduction statement, cross-referenced to bank statements. If you miss its deadline, it amends the claim to what its own records show and you cannot make another claim for that tax year, although you can appeal.

Deductions logged against the wrong UTR. This is the classic incorporation problem. You move from sole trader to limited company, the contractor is never told, and deductions keep landing on your old personal UTR. If the contractor did not know the company existed, HMRC will reduce the company’s claim for those deductions to nil and give credit for them in the sole trader’s or partnership’s Self Assessment return instead. The money is not lost, but it lands on the wrong return, and the company must pay any PAYE it held back on the strength of the claim.

Manual checking. HMRC checks each claim against the deductions its contractors have reported. It aims to respond within 8 weeks, but a claim that does not match is held while it asks for payment and deduction statements and bank statements, and those claims often take several months.

Tip

Keep every payment and deduction statement as it arrives and reconcile it to your bank monthly. If HMRC asks for evidence twelve months later and you cannot produce it, HMRC amends the claim to what its own records show, and any deductions it cannot match are lost for that year. If a statement is missing, ask the contractor for it first. HMRC deals with only one request per customer for copies of payment and deduction statements, and refuses further requests unless you can show you tried to get them from the contractor.

What should you do next?

Reconcile your CIS deductions against your bank monthly rather than annually, as part of your monthly bookkeeping. Confirm your company is registered as a subcontractor under the company UTR. Make sure your EPS carries the cumulative figure, and unless the company has stopped trading, make the year-end claim after 19 April, once your contractors’ final monthly returns are in.

If your company is owed money every year, gross payment status may stop the deductions altogether. To qualify, the company must pass HMRC’s business, turnover and compliance tests: at least £30,000 of construction turnover per director, or £100,000 for the whole company, in the last 12 months (excluding VAT and materials), and a record of filing and paying on time. The late returns that hold up a repayment claim can also cost you gross payment status.

Most accountants file the return. The reason our clients recover this money faster is that we look at it as tax advisers first, and we know where HMRC’s checks land because our team includes professionals who have worked inside HMRC. When a claim is queried, whether it is settled within HMRC’s usual 8 weeks or drags on for six months depends on whether the evidence was assembled before the question was asked.

If your CIS repayments are slow, or you are not certain the claim is being made correctly, speak to a Chartered Tax Adviser. You can read more about what our CIS accountants do, and see a real £84,000 recovery in our tax saving case studies.

CIS refund for a limited company: frequently asked questions

How long does a CIS refund take for a limited company?

Offsetting deductions in-year through the EPS reduces the PAYE you pay that month. Some people call this a CIS tax rebate; it is the same claim. For year-end repayment claims, HMRC says it usually responds within 8 weeks, but a claim that does not match your contractors’ returns can take several months.

Can I claim CIS back on my Corporation Tax return?

No. It is the wrong route, and HMRC may charge a penalty if you use it.

What if my company has no PAYE liability to offset?

File an EPS showing your CIS deductions for the year to date each month, then claim the whole amount back from HMRC after the tax year ends. If the company has no PAYE scheme, register as an employer first, because the claim needs your PAYE reference.

Does my company need a PAYE scheme to reclaim CIS deductions?

Yes. A limited company reclaims CIS deductions through its PAYE scheme, by filing an EPS and then a repayment claim that asks for the PAYE reference. If the company has no employees or payroll, register as an employer first.

Do sole traders claim CIS back the same way?

No. Sole traders claim CIS deductions back through their Self Assessment tax return.