That’s the Construction Industry Scheme. The idea is simple: contractors deduct tax from your payments and pass it to HMRC.
But for a lot of subcontractors it means:
- You overpay tax most of the year
- Paperwork piles up
- Getting a refund takes longer than it should
Most of us just want to get paid properly and crack on with the job. The good news? CIS doesn’t have to be this painful. A few small changes can make it easier — and often put more money back in your pocket.
The 20% CIS Deduction Isn’t Your Tax Bill
According to GOV.UK Construction Industry Scheme guidance, subcontractors can apply for gross payment status if they meet certain qualifying conditions including a turnover threshold and compliance record.
One of the biggest misunderstandings on site is thinking the 20% CIS deduction is the tax you owe.
It isn’t.
It’s simply tax paid in advance. CIS deductions are taken from what you’re paid before the 20% deduction — not from your actual profit.
And that matters, because the system completely ignores the real costs of doing the job:
- Fuel and travel between sites
- Tools and replacements
- Protective gear and PPE
- Insurance, phone bills, van repairs
- Training and certificates
The key point
Once those costs are taken into account, the tax you actually owe is often far lower than what’s already been deducted. That’s why so many subcontractors end up due a refund.
The Paperwork Problem
Most subcontractors are focused on the job, not keeping perfect records.
Receipts get left in the van. Fuel payments get forgotten. Tool purchases blur into the working week.
Before long you’re trying to remember half a year of spending when the tax deadline is round the corner.
That’s when expenses get missed. And every missed expense means your tax bill ends up higher than it should be.
The Quiet Way Subcontractors Lose Money
Most subcontractors don’t lose money to CIS because something has gone wrong. They lose it because expenses are missed. Not deliberately — just because it’s difficult to track everything when you’re busy working.
Here’s how that quietly affects a return:
Expenses look lower than they really are
Profit looks higher
Tax increases
Refunds shrink
Worth remembering
A tax return can be submitted and still leave money on the table. It happens every single year.
What CIS Refunds Look Like in the Real World
Across the UK, over £30–40 billion is paid to subcontractors through CIS each year, with billions deducted in advance tax by contractors before payments are made. Because these deductions are based on gross payments rather than actual profit, a large number of subcontractors end up overpaying tax during the year.
£30–40bn
Paid through CIS annually
£800–£3k
Typical refund range
£3k+
Higher earners / missed years
HMRC doesn’t publish a single official “average CIS refund” figure, but industry data from accountants and contractor forums consistently shows many subcontractors receiving refunds ranging between £800 and £3,000, depending on income and expenses.
Why this matters
CIS deductions happen before expenses are taken into account, so until a Self Assessment return is filed, HMRC is effectively holding tax that may not actually be owed. The more accurately expenses are captured, the more likely it is that the refund reflects the real cost of doing the job.
The Top 10 CIS Expenses People Forget
When accountants look at subcontractor returns, the same missing expenses come up again and again. These are worth double-checking.
Mileage between sites
Site-to-site travel at 45p per mile adds up fast across a year.
Small consumables
Blades, drill bits, fixings — the stuff you buy without thinking.
Protective clothing and PPE
Hi-vis, steel-toe boots, hard hats, gloves — anything for site safety.
Replacement tools
Not just new purchases — replacing worn-out or broken tools counts too.
Van servicing, tyres and repairs
If your van is used for work, the running costs are deductible.
Public liability insurance
A business cost that many subcontractors forget to include.
Mobile phone business use
The business proportion of your phone bill is a legitimate claim.
Trade memberships
CSCS, Gas Safe, NICEIC, trade body memberships — all allowable.
Training courses and certificates
Courses that maintain or update your existing skills for your current trade.
Accountancy fees
Yes — the cost of getting your tax done is itself a deductible expense.
The bottom line on expenses
Any one of these might seem small. But together they can easily mean hundreds or even thousands of pounds in additional deductions.
Real CIS Refund Examples
These are typical scenarios accountants see every year when subcontractor tax returns are prepared properly.
The missed mileage
A carpenter working across multiple sites had around 8,000 miles of site travel during the year but hadn’t tracked it properly.
Once mileage was calculated and claimed, it created an additional deduction of roughly £3,600.
The van costs nobody counted
An electrician had recorded fuel but hadn’t included:
- Tyres, servicing, insurance, road tax
Adding those legitimate costs reduced his taxable profit significantly.
Small purchases that add up
A subcontractor buying fixings, blades, safety gear and small tools throughout the year had receipts scattered everywhere.
Once everything was added up, those “small purchases” came to nearly £2,400 in allowable expenses.
Why CIS Refunds Take Time
Even when everything is submitted correctly, refunds don’t always arrive quickly. HMRC often needs to run checks.
Matching contractor records
Your deductions are compared with what contractors have reported to HMRC. If anything doesn’t line up, it can slow things down.
Security checks
Larger refunds sometimes trigger extra checks. First-time claims get more scrutiny too.
Self Assessment season
Around the January deadline, HMRC systems and staff are under pressure. Which means delays happen — every single year.
The Small Changes That Make CIS Easier
The subcontractors who have the least trouble with tax usually do a few simple things consistently.
Keep CIS deduction statements organised
Record expenses during the year — not in January
Track mileage between sites
Separate labour and materials on invoices
Look at the numbers before the January rush
None of this is complicated. But it makes filing far easier — and your refund far bigger.
For a lot of subcontractors, the difference between a small refund and a proper one isn’t the tax rules — it’s whether every legitimate expense has actually been captured.
Where 123 Tax Helps
Trying to rebuild a year of finances in January is where most problems start. 123 Tax is designed to make that easier.
- Keep track of CIS deductions as they happen
- Record expenses properly — just WhatsApp us a photo
- Understand your tax position during the year, not after it
- Submit a cleaner return that gets processed faster
The aim is simple: make sure you’re not paying more tax than you need to, and that the refund you’re owed actually comes back.
Summary
CIS isn’t going anywhere. But the frustration around it usually comes down to organisation and missed deductions.
Subcontractors who handle CIS smoothly tend to:
Track expenses properly throughout the year
Keep their records organised
Avoid leaving everything until the last minute
Those small habits reduce stress and increase refunds. And with the right systems in place, managing CIS becomes just another part of running the business — rather than something hanging over you every January.