If you work in construction or hire subcontractors, you’ve probably heard of the Construction Industry Scheme (CIS). CIS is how HMRC collects tax from subcontractors. Contractors deduct money from your payments and send it to HMRC but sometimes mistakes happen and you may pay more tax than necessary. The good news? You can reclaim it.
What is CIS and how does it work?
Before we get into reclaiming deductions, it helps to understand the system:
- Contractors deduct tax from payments to subcontractors
- Deductions are usually 20%, or 30% if the subcontractor isn’t registered
- Contractors report deductions to HMRC
Why you might be paying too much CIS
CIS deductions are usually straightforward, but errors can happen:
- Being taxed at the wrong rate (20% vs 30%)
- Duplicate deductions from the same payment
- Errors in paperwork or contractor reporting
If any of these happen, you could be overpaying HMRC without even realising it.
How to reclaim overpaid CIS tax
Here’s a clear step-by-step guide:
1. Check your CIS statements
Your contractor should provide monthly statements showing what was deducted. Compare these with your own records.
2. Calculate the overpayment
Look at total deductions versus what you should have paid based on your tax status.
3. Contact HMRC
HMRC allows you to reclaim overpaid tax. You’ll need:
- Your CIS records
- Unique Taxpayer Reference (UTR)
- Proof of deductions
4. File your claim
You can claim via your Self-Assessment tax return, or directly with HMRC if you don’t file one.
5. Keep records
Keep documentation for at least six years—HMRC may ask for proof.
Tips to avoid overpaying CIS in the future
- Make sure you’re registered for CIS and your contractor has correct details
- Keep accurate records of all payments and deductions
- Review monthly statements carefully
How Coconut can help with CIS
Tracking payments, deductions and expenses manually can be a headache especially if you’re juggling multiple projects. Coconut makes it easier:
- Automatically track income and CIS deductions
- Spot overpayments quickly
- Keep all your records ready for tax time
This helps you reclaim overpaid tax without the stress. Start your 30-day free trial today.
