CIS Deductions Suffered — How Subcontractors Reclaim Their CIS Tax (2026)

What "CIS Suffered" Actually Means

Under CIS, a contractor who pays a subcontractor for construction work must deduct tax from the labour element of the payment and send it directly to HMRC. From the subcontractor's point of view, that deducted amount is the CIS "suffered" — tax you have effectively already paid before you've filed a single return.

The crucial detail is that CIS is only deducted from labour, not from the cost of materials, plant hire, fuel or VAT. If you invoice £1,000 for labour plus £400 for materials, the contractor deducts CIS on the £1,000 only. The deduction is also taken from the net (pre-VAT) figure — VAT itself is never subject to CIS.

The 20% Standard Rate vs the 30% Unregistered Rate

There are three CIS rates, and which one a contractor applies to you is decided by your CIS verification status when they check you against HMRC's system:

• 20% — registered subcontractor: the standard rate that applies once you've registered for CIS and HMRC confirms you to the contractor at verification.
• 30% — unregistered subcontractor: the higher rate applied when you have not registered for CIS, or the contractor cannot verify you. It is the same money, reclaimed the same way — but losing an extra 10% at source is brutal on cash flow, so register before you take on subcontract work.
• 0% — gross payment status: if you qualify and apply for gross payment status, contractors pay you in full with no deduction, and you settle your tax through your normal return instead. This is the goal for established businesses with strong turnover and a clean compliance record.

Whichever rate applies, the principle is identical: the deduction is an advance payment against your eventual tax bill. The only question is the route you use to reclaim or offset it.

Sole Traders: Reclaim Through Self Assessment

If you operate as a sole trader (or in a partnership), you reclaim CIS suffered through your Self Assessment tax return. There is no separate CIS refund process during the year — it all comes out in the wash when you file.

On your tax return you declare your full income and work out your Income Tax and Class 4 National Insurance for the year as normal. You then enter the total CIS deductions suffered during that tax year in the dedicated box on the self-employment pages. HMRC treats that figure as tax already paid and offsets it against your bill.

• If the CIS suffered is less than your tax bill, it simply reduces what you owe. You pay the difference.
• If the CIS suffered is more than your tax bill, you've overpaid — HMRC refunds the excess, or sets it against your next payment on account if you ask them to.

For many labour-only sole traders this is a near-annual event: 20% deducted across the year frequently exceeds the actual tax due once the personal allowance and expenses are taken into account, so a refund is common. The catch is timing. The tax year ends on 5 April 2026, the filing deadline for an online return is 31 January 2027, and HMRC only processes the refund after the return is filed and checked. File early in the new tax year and you can have the refund months sooner.

Limited Companies: Reclaim Through the EPS and PAYE

This is where most mistakes happen. A limited company subcontractor does not reclaim CIS suffered through its Corporation Tax return, and does not get it back through Self Assessment. CIS suffered by a company is recovered through the company's own PAYE scheme, using the Employer Payment Summary (EPS).

Each month, when you run payroll and report to HMRC under Real Time Information (RTI), you submit an EPS that tells HMRC the total CIS deductions your company has suffered that month. HMRC then lets you offset that CIS against the PAYE tax and National Insurance your company owes as an employer — including the tax and NIC on directors' and employees' wages.

• CIS suffered first reduces your monthly PAYE/NIC liability. If your company owes £900 in PAYE/NIC and has suffered £1,100 of CIS, you pay nothing that month and carry £200 forward.
• Unused CIS rolls forward through the tax year, offsetting against future PAYE/NIC liabilities.
• If CIS suffered still exceeds your total PAYE/NIC by the end of the tax year, you can ask HMRC to refund the surplus or set it against other liabilities such as Corporation Tax or VAT after the year-end reconciliation.

Why You Must Not Put CIS Suffered on the Corporation Tax Return

CIS deductions are deductions of employment-type tax at source, not Corporation Tax payments. The company's Corporation Tax is calculated on its profits and is a completely separate liability. If you try to offset CIS suffered against Corporation Tax — or simply assume the CIS will "come off" the CT bill — you'll end up with a CT return that doesn't reconcile, a PAYE scheme showing an ever-growing credit you never claimed, and potentially an overpayment sitting with HMRC that you have to chase.

The rule for limited companies is simple: CIS suffered goes on the monthly EPS, against PAYE, every single month — never on the CT600. A company that doesn't run a payroll scheme has no EPS to file, so a subcontractor company that suffers CIS should normally operate a PAYE scheme purely to enable the reclaim.

Keep Every Monthly CIS Deduction Statement

Whatever your structure, your ability to reclaim depends on evidence. By law, every contractor who deducts CIS from you must give you a monthly CIS payment and deduction statement by the 19th of the month following the deduction. This statement is your proof. It shows:

• The contractor's name and employer reference
• The gross amount paid (excluding VAT)
• The cost of materials excluded from the deduction
• The amount of CIS deducted
• Your unique taxpayer reference (UTR) or verification number

Reconcile these statements against your own records every month. If a contractor reports a different figure to HMRC than the deduction shown on your statement, the figures won't match and your reclaim can be held up or queried. Chase missing statements promptly — you are legally entitled to them, and you cannot safely support a refund claim without them. Keep statements for at least the standard record-retention period (a minimum of three years after the end of the relevant tax year, and longer is wise).

Common Errors That Cost Subcontractors Money

• Companies trying to reclaim via Corporation Tax or Self Assessment. The single most expensive mistake — it must go through the EPS against PAYE.
• Not filing an EPS in months with nil PAYE. A company with suffered CIS still needs to report it; skip a month and the offset doesn't register.
• Letting CIS be deducted from materials. Make sure your invoices clearly split labour from materials, plant and consumables so the contractor only deducts on labour.
• Staying on the 30% rate. Failing to register for CIS means 10% more taken at source for no benefit — register and verify.
• Missing or unreconciled statements. No statement, no reliable proof; mismatched figures, delayed refund.
• Filing Self Assessment late. Sole traders who delay simply delay their own refund — there's a direct cash cost to leaving it until January.

The Cash-Flow Impact of Waiting for a Refund

CIS suffered is your money — but it's your money tied up with HMRC until you reclaim it. For a labour-only sole trader turning over, say, £60,000 of labour a year, 20% deducted at source is £12,000 sitting with HMRC across the year. If you only file in January, that's a substantial sum you can't use to buy materials, cover van costs or pay yourself through the quieter winter months.

A few practical steps keep the cash moving:

• File your Self Assessment as early as possible after 5 April. The return can be filed from the start of the new tax year — there's no reason to wait until the deadline if you're due a refund.
• For companies, file the EPS on time every month so the offset reduces your PAYE bill in real time rather than building up a credit you have to chase at year-end.
• Forecast it. Treat CIS suffered as a known, recoverable asset in your cash-flow planning rather than a surprise, so the refund supplements your position instead of rescuing it.
• Consider gross payment status if your turnover and compliance record qualify — being paid in full removes the cash-flow drag entirely, though it shifts the responsibility for settling tax onto you.

Quick Reference: How CIS Suffered Is Reclaimed (2026)