As a subcontractor, the tax deducted from your payments under CIS should be credited against your overall tax liability for the year. When you file your Self-Assessment tax return, you can include the CIS deductions to offset your final tax bill. Here’s a step-by-step guide:

1. Check Your CIS Deductions: Contractors who deduct CIS tax from your payments are required to provide you with a payment statement that shows the total amount of CIS tax deducted. Ensure you collect these statements throughout the year. The amount deducted is typically shown as a percentage of the gross payment you received.
2. Include CIS Deductions on Your Self-Assessment Tax Return: When completing your Self-Assessment, you’ll report your total income from your contracting work as well as the CIS deductions you’ve received. There’s a specific section within the “Income from Self-Employment” section of the return to input this information. HMRC will then credit your deductions against your overall tax liability.
3. Calculate Your Final Tax Liability: Once you’ve entered your total earnings and CIS deductions, HMRC will calculate your final tax liability. If the CIS deductions exceed the tax due, you may receive a refund. In some cases, you might still owe additional tax if your overall earnings push you into a higher tax bracket.
4. Claiming Back Overpaid CIS: If the CIS deductions you’ve received are more than your actual tax liability, HMRC will issue a refund once your Self-Assessment is processed. Make sure your return is accurate and filed on time to avoid delays.

To ensure you can successfully claim your CIS deductions and comply with tax regulations, it’s essential to maintain clear, organised records throughout the year. Below is a list of documents and records to keep:

1. Payment Statements: Keep a copy of all CIS payment statements you receive from contractors. These documents show how much tax has been deducted from your payments and are essential for reporting the correct figures on your Self-Assessment.
2. Invoices: Retain copies of all invoices you send to contractors for work completed. Your invoices should show the agreed-upon rate, the gross payment, and any CIS deductions taken.
3. Bank Statements: Bank statements will show the actual payments made to you after CIS deductions. These can serve as proof of income and help reconcile your financial records.
4. Receipts for Expenses: If you incur any business-related expenses (e.g. tools, equipment, travel), keep receipts as they may be deductible against your income, reducing your tax liability. Ensure the receipts are clear and categorised for easy reference.
5. Timesheets and Contracts: Keep timesheets, contracts, or any other documentation showing the work you’ve completed. This will support the amounts you report in your tax return and ensure you can demonstrate the basis for your income if HMRC asks for further information.
6. Self-Assessment Confirmation: After submitting your Self-Assessment, ensure you retain a copy of the confirmation and any related correspondence from HMRC, including notices of tax due or refunds.

Maintaining accurate and up-to-date records is not just important for recovering CIS deductions – it’s also crucial for avoiding penalties, ensuring that your Self-Assessment is correct, and staying compliant with HMRC’s rules. Poor record-keeping can result in mistakes on your tax return, potentially leading to missed deductions or overpayments.

By keeping thorough records, you’ll be able to quickly and efficiently submit your Self-Assessment, claim any refunds due, and demonstrate your compliance in the event of an audit.