A limited company gets its CIS deductions back in two stages. During the tax year it knocks them off its own PAYE bill each month, by reporting them on the Employer Payment Summary (EPS). After the tax year ends on 5 April, whatever hasn't been used is claimed back from HMRC in one repayment claim, made online once the company's payroll submissions and Company Tax Returns are all in. HMRC says it usually responds within 8 weeks.
That's the short answer to how you claim a CIS refund for a limited company. The rest of this article is the detail: how the monthly set-off works, what the year-end claim needs, and the handful of mistakes that stop the money arriving. If you're new to deductions generally, start with our guide to how CIS deductions work →.
Why a company can't just wait for the tax return
Sole traders get their deductions back through Self Assessment. The CIS figure goes on the return, HMRC sets it against the tax bill and refunds the rest. Plenty of people assume a limited company works the same way through its Corporation Tax return. It doesn't, and HMRC is blunt about it: don't use your Corporation Tax return to pay tax with your CIS deductions, because you may get a penalty.
For a company, CIS deductions suffered run through the PAYE system instead. That's actually better for cash flow, because you start getting the benefit in the first month rather than the following year.
Stage one: setting deductions off against PAYE each month
Every month you run payroll and send the Full Payment Submission (FPS) as normal. Alongside it you send an EPS showing the total CIS deductions the company has suffered for the tax year to date. HMRC then sets those deductions against what the company owes for PAYE, employee and employer National Insurance, student loan deductions and, if you pay subbies yourself, the CIS you've deducted from them. You simply pay over less, or nothing.
If the deductions are bigger than the PAYE bill in a month, the excess carries forward to the next month within the same tax year, as long as the EPS keeps showing the running total. What it can't do is carry into the next tax year. Anything left at 5 April has to be reclaimed.
Example: a two-director groundworks company over a tax year
The company is paid under deduction at 20% on around £10,000 of labour a month. It runs a small payroll for the two directors and one labourer.
| £ | |
|---|---|
| CIS deducted by contractors in the year | 24,000 |
| PAYE and NIC for the year, covered by set-off | (14,400) |
| Left to reclaim after 5 April | 9,600 |
Without the monthly set-off the company would have paid £14,400 to HMRC in cash and waited for all £24,000 to come back.
Two practical points. First, the EPS figure is cumulative. Entering this month's deductions instead of the year-to-date total is one of the most common payroll errors we see, and it quietly under-claims until someone spots it. Second, HMRC expects you to keep a record of the deductions you've used each month or quarter (its form CIS132 is one way to do that) along with every payment and deduction statement from your contractors.
The whole system runs through the company's PAYE scheme, and the year-end claim asks for your PAYE reference. If your company has no payroll at all, talk to your accountant well before the year end about how you'll recover the deductions.
Stage two: claim CIS refund for limited company overpayments after 5 April
Once the tax year has ended you can claim whatever wasn't set off. Before you do, HMRC wants to see that you've sent all the FPS and EPS submissions for the year and your Company Tax Returns. A claim made with gaps in either will stall.
You'll need:
- the overpayment figure, which is the total CIS deducted from the company minus the total already used to pay tax
- the company name, PAYE reference and Corporation Tax reference
- bank details, if you want the money paid out rather than kept against other taxes
- copies of payment and deduction statements, if your figures won't match what HMRC holds
You make the claim online using the Government Gateway sign-in linked to the company's Corporation Tax and PAYE accounts, or on paper to HMRC's CIS repayment address. If you want the money paid to an agent or someone else, it needs a form R38 or a signed authority. HMRC's guidance on claiming a CIS refund as a limited company links to the online form.
HMRC doesn't necessarily send all of it back. It first uses the deductions to clear any overdue PAYE or Corporation Tax. What's left can be paid out, or used towards VAT or an upcoming Corporation Tax bill if you'd prefer. So if a VAT quarter is about to land, having the refund sit against it is a perfectly sensible choice.
One exception to the timing: if the company has stopped trading, you can claim for the current tax year without waiting for 5 April.
Where limited company CIS refund claims go wrong
Almost every stuck claim we look at comes back to the same thing: HMRC's figure doesn't match yours. HMRC builds its figure from the monthly returns your contractors file. If a main contractor reported you under the wrong UTR, used the director's name instead of the company's, or simply filed late, HMRC's record will be short and it will ask for evidence. That's why the statements matter. File them as they come in each month, not in a panic in April.
If HMRC queries your claim and asks for evidence, reply by the date it gives. If you don't, it revises the claim on the information it has and you lose the chance to amend that tax year. That's a painful way to lose a few thousand pounds for the sake of a letter left in the van.
The other regular snag is an overdue return somewhere else. A late Company Tax Return, a missing EPS for one month, or an unpaid PAYE balance will all hold things up or eat into the refund. Keeping the company's filings current all year is half the job. Our contractor's year-end checklist → covers what to get in order before 5 April.
Plan for the gap
Even with the monthly set-off, a subbie company paid under deduction usually has several thousand pounds tied up with HMRC for months after the year end. Treat the refund as money that will arrive, not money you can spend in April. Put it in your cash flow forecast with a realistic date and you won't be caught short waiting for it. How 13-week cash flow forecasting works →
And if the refund is large every single year, that's a sign the deductions are running far ahead of your real tax. At that point it's worth looking at whether the company could qualify for gross payment status and stop the deductions at source. CIS gross payment status: what it is and how to qualify →
Frequently asked questions
How does a limited company claim back CIS deductions?
During the tax year it reports the CIS deductions it has suffered on its monthly Employer Payment Summary and sets them against its PAYE and National Insurance bill. After 5 April it claims any deductions left over from HMRC, online or by post.
Can I claim CIS deductions on my Corporation Tax return?
No. HMRC says limited companies should not use the Corporation Tax return to pay tax with CIS deductions and may charge a penalty if they do. Deductions go through the PAYE system instead.
How long does a limited company CIS refund take?
HMRC says it usually responds to claims within 8 weeks. Claims take longer if your figures don't match the returns contractors filed, or if any payroll submissions or Company Tax Returns are missing.
Can a limited company claim a CIS refund before the end of the tax year?
Only if the company has stopped trading. Otherwise any unused deductions carry forward month to month within the tax year and are claimed after 5 April.
Want your CIS refund sorted properly?
Book a free, no-obligation discovery call and we'll check your EPS figures, your statements and your claim so the money comes back without a fight.
Schedule a CallThis article is general guidance for building contractors, not advice for your specific situation. Always review your own circumstances with your accountant before acting.
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