What expenses can CIS subcontractors claim?
Claiming the right expenses is what turns a CIS deduction into a refund. Here's what subcontractors can usually claim, with the simple test for whether a cost counts.
In short: Under the Construction Industry Scheme, a contractor deducts 20% from a registered subcontractor's labour (30% if you're not registered) and pays it to HMRC as an advance on your tax bill. Because it's taken before expenses and your personal allowance are counted, most subcontractors end up owed a refund after filing.
If you work in construction as a subcontractor, you’ve probably had the slightly deflating experience of agreeing a price, doing the work, and then being paid less than you expected. The missing slice is almost always CIS — the Construction Industry Scheme. It’s not a penalty and it’s not an extra tax. It’s the taxman taking a down payment on your bill before the money reaches you.
What CIS actually is
The Construction Industry Scheme is HMRC’s way of collecting tax from construction work as it happens, rather than waiting until the end of the year. When a contractor pays a subcontractor, they’re required to deduct a percentage and send it straight to HMRC against the subcontractor’s eventual tax bill.
If you’re registered under CIS, that deduction is 20%. If you’re not registered — or HMRC can’t verify you — it jumps to 30%. That gap is the single best reason to register: same work, more money in hand each week.
What the deduction is taken from
The deduction applies to the labour part of what you invoice, not to genuine materials you’ve paid for and passed on. So if you invoice £1,000 for labour plus £400 for materials, the 20% comes off the £1,000 — £200 — not the full £1,400. This is exactly why it pays to itemise materials clearly on your invoices.
Why most subcontractors are owed money back
Here’s the part that catches people out, and why a refund is so common. The CIS deduction is a blunt instrument: it’s taken from your gross labour, before your business expenses are counted, and it completely ignores your tax-free personal allowance. Your real tax bill is calculated on your profit (income minus allowable expenses) with your personal allowance applied. That figure is usually lower than the total deducted across the year — and the difference comes back to you.
A quick illustration: say you invoiced £30,000 of labour over the year, had £6,000 deducted under CIS, and spent £3,000 on tools, fuel and insurance. Your taxable profit is £27,000, and the income tax and National Insurance due on that comes to noticeably less than £6,000 — so you’d be looking at a refund. You can put your own numbers into the CIS Tax Refund Calculator to see a rough estimate.
How you get it sorted
The reconciliation happens through Self Assessment. You report your income, your CIS deductions and your expenses on your tax return, HMRC works out what you actually owed, and refunds the difference. Keep your CIS statements and your receipts — they’re what back up the claim.
If you want the detail on what you can legitimately deduct, the companion guide on allowable expenses for CIS subcontractors goes through it properly.
This article is general information, not tax advice. Check your own figures against your CIS statements and HMRC’s CIS guidance, and speak to an accountant if your situation is complicated.