Company subcontractors paid under deduction

If your business is a limited company and has had Construction Industry Scheme (CIS) deductions taken from its payments during the tax year – which runs from 6 April to the following 5 April – as part of the changes introduced by Real Time Information (RTI) the company must complete a monthly ‘Employer Payment Summary’ (EPS) on which it must show the CIS deductions taken from the company’s payments each tax month, together with the total CIS deductions for the year to date.

This guide explains how you can use the EPS returns to reclaim deductions taken from the company’s payments.

Note: Only companies can use this arrangement to reclaim CIS deductions taken from payments - not individual subcontractors or partnerships.

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Reclaim CIS deductions taken from payments

Where your company is paid under deduction for work done within the construction industry you should offset the CIS deductions during the tax year against the company's monthly or quarterly liabilities for PAYE/National Insurance contributions (NICs) and any CIS deductions taken from the company's own subcontractors.
The company should account for all CIS deductions made from its payments that it offset against its own liabilities on the monthly Employer Payment Summary (EPS) return. Where your company believes that a repayment is due at the end of the tax year, you must make a request in writing for this repayment quoting your employers or accounts office reference and send it to:

HM Revenue & Customs
Employer Office
Room BP4009
Chillingham House
Benton Park View
Newcastle Upon Tyne
NE98 1ZZ

At the end of the tax year, HM Revenue & Customs (HMRC) will repay to the company (or its nominee) any balance of the CIS deductions that the company was not able to offset during the year.

To enable HMRC to do this, the company must have sent in its

  • final Full Payment Submission (FPS), where this is due,
  • final EPS for the tax year, and
  • request for repayment.

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Setting CIS deductions against monthly or quarterly liabilities

Each month, or quarter (in some circumstances), the company should set against its liabilities for PAYE/NICs and CIS deductions from its own subcontractors, the full amount of any CIS deductions taken from its own payments for work undertaken in the construction industry. If, by doing this, the company's liability for the period is reduced to nil and there are still some unused CIS deductions that have not been offset, you should carry these forward to the next month or quarter within the same tax year. Don't forget to tell HMRC that you have no liability to pay over for the month or quarter. The company does this by sending an Employer Payment Summary (EPS) which will also show the CIS deductions made from its own income in the last tax month and also for the tax year to date.

If the company's CIS deductions, available for set off in any month or quarter, do not cover the whole of the company's liability for that period you must pay over the balance to HMRC by the usual payment date and also send HMRC an EPS showing what CIS deductions have been made from the company’s own income.

Inform HMRC that no PAYE/NICs payment is due

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Getting payment and deduction statements from the company's contractors

When a contractor pays your company under deduction for work undertaken in the construction industry it is legally required to give the company a payment and deduction statement showing the full amount of the payment and details of the deduction that it has made from that payment. It is therefore very important that you ensure the contractor gives you these statements and that you keep hold of them securely. You will need them when you come to complete the company's EPS returns, especially if there are any queries with HMRC as to what the company has been paid and what deductions have been taken from those payments. Even if you have problems getting these statements from the contractor the company can still offset the deduction against its monthly or quarterly payments.

Find out more about payment and deduction statements

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Keeping a record of amounts set off

The company must keep a record of the amounts set off against its monthly or quarterly liabilities. HMRC provides form CIS132 for this purpose or you may keep your own records if you prefer. If the company uses form P32 Employer Payment record or the table in its Payslip Booklet to record its PAYE/NICs/CIS payments, you should leave columns 16 and 17 blank.

Obtain form CIS132 'Record of amounts set off' (PDF 56K)'

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Accounting for the deductions and claiming back any repayment due

Although it is not mandatory for the company to submit its CIS monthly returns (CIS300) online, in all but very few exceptional circumstances, the company must file the EPS returns electronically.

At the end of each tax month, the company should show its CIS deductions on the EPS return. The EPS must be completed even if the company had no employees during the tax year. In these circumstances, there will be no requirement for the company to complete any FPS each month as no payments will have been made to employees or company directors.

You should show the full amount of any CIS deductions taken from the company's payments for construction work during the tax month and the cumulative amount for the tax year to date. If you have used form CIS132, copy this total from column E of that form or from whatever alternative record you have kept. The amount must be entered into the 'Construction Industry Scheme deductions' field on the online EPS or in the same named box on the paper return if, exceptionally, you don't file this return online. Please call the Employer Helpline if you need a blank paper EPS return.

You should show the CIS deductions taken from the company's payments during the tax month and the total deducted in the tax year to date and not for the company's accounting period. You should not attempt to claim this credit on the company's Corporation Tax return as you may incur a penalty if you do this.

To claim a repayment of CIS deductions after the end of the tax year see the section in this guide ''Reclaim CIS deductions taken from payments'.

Where there is a discrepancy between your monthly returns and what has been paid to HMRC

If there is a discrepancy and you believe an amount shown on one or more CIS monthly returns may be incorrect, you will need to amend each incorrect CIS300 monthly return by phoning the CIS Helpline.

CIS Helpline

Employer Helpline

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More useful links

Get form CIS132 'Record of amounts set off' (PDF 56K)'

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