What is CIS suffered?
Under the Construction Industry Scheme, a contractor paying a subcontractor for construction work must deduct tax from the labour element of the payment and pass it to HMRC. The standard rate is 20% for registered subcontractors and 30% for unregistered ones. From the subcontractor's side, that deduction is "CIS suffered": tax paid on your behalf, in advance, that belongs to you.
How you get it back depends on what kind of business you are. A sole trader or partnership sets it against their self-assessment bill. A limited company has two routes, and the difference between them is worth tens of thousands of pounds of cash flow.
The two ways a limited company recovers CIS suffered
Route one: annual reclaim. Pay your PAYE in full every month. After 5 April, reconcile the year's CIS suffered and claim the balance back from HMRC. The refund arrives in the summer or autumn, several months after the year has ended and up to eighteen months after some of the deductions were made.
Route two: monthly offset. Each month, report the CIS suffered on your Employer Payment Summary (EPS). HMRC sets it against your PAYE, employer's National Insurance and any CIS you've deducted from your own subcontractors. You pay only the difference. Anything left over at year-end is reclaimed as in route one, but most of it never needs to be.
Route two is the one HMRC designed. Route one is what happens by default when nobody at the accountancy firm has set up the process.
What it's worth: a worked example
A £2m electrical subcontractor with eight employees and a monthly PAYE liability of £9,400. Customers deduct CIS at 20% on the labour element of around £120k of monthly applications, roughly £7,000 a month suffered.
| Month | PAYE due | CIS suffered | Paid to HMRC (offset) | Paid to HMRC (annual route) |
|---|---|---|---|---|
| April | £9,400 | £7,100 | £2,300 | £9,400 |
| May | £9,400 | £11,800 | £0 (£2,400 carried) | £9,400 |
| June | £9,400 | £6,200 | £800 | £9,400 |
| Over the year | £112,800 | £84,000 | £28,800 | £112,800, then £84,000 refunded in October |
Same tax, same year, same business. On the annual route the company pays £84,000 it doesn't owe and waits six months for it back. On monthly offset it never leaves the account. The autumn overdraft peak that the owner assumed was "just how the business works" disappears.
What you need in place
- Payment and deduction statements from every contractor, every month. Contractors are required to issue these within 14 days of the end of the tax month. Chase any that don't arrive; without the statement you can't evidence the deduction.
- A reconciliation before the EPS is filed. CIS suffered reported must match the statements. Report it cumulatively for the tax year, not just the month.
- A payroll process that does this every month. Most payroll software has a CIS suffered field on the EPS. The problem is rarely the software; it's that nobody has been told to fill it in.
- Your company's PAYE reference and UTR on every EPS. HMRC matches the offset to your contractor record by these.
Common mistakes
- Reporting the month's figure instead of the year-to-date figure. The EPS wants cumulative CIS suffered for the tax year. Getting this wrong understates the offset.
- Offsetting against the wrong liability. CIS suffered can only be set against PAYE, NI and CIS deducted. Not VAT, not corporation tax.
- Claiming deductions on materials. CIS applies to labour. If a contractor has deducted on your materials, that's their error; you still claim what was deducted, but it's worth correcting the invoice format so it doesn't recur.
- Missing statements. If a contractor won't issue statements, HMRC can still accept your own records, but it's a harder conversation. Get the statements.
Gross payment status: the longer-term fix
If your turnover is over the threshold (net of VAT and materials: £30,000 for a sole trader, £30,000 per director or £100,000 for a company), your business is run through a bank account, and your tax affairs have been compliant, you can apply for gross payment status. Contractors then pay you without deduction at all, and the CIS suffered question goes away. The catch: HMRC reviews compliance annually, and a late return or payment can cost you the status. We help clients apply and, more importantly, keep it.
What to do this week
Pull your last twelve months of CIS statements. Total the deductions. Compare that to what's been reported on your EPS submissions in the same period. The difference is money sitting with HMRC that could be in your account next month. If you don't know where the EPS submissions are, that's the first conversation to have with whoever runs your payroll.
Sources
Questions people ask
Can a sole trader offset CIS suffered monthly?
No. Monthly offset through the EPS is only available to limited companies. Sole traders and partnerships set CIS suffered against their self-assessment liability for the year. It's one of the stronger arguments for incorporating a growing subcontractor business.
What if CIS suffered is more than my PAYE in a month?
The excess carries forward within the tax year and is set against later months. Anything still unused at 5 April is reclaimed from HMRC after the year-end.
How far back can I claim CIS suffered I never offset?
Amounts not offset are reclaimed through the year-end process for that tax year. If a prior year's reclaim was never made, it can usually still be claimed, subject to HMRC's time limits; speak to your accountant promptly.
Do I need to be CIS registered to claim CIS suffered?
You should be. Unregistered subcontractors suffer deductions at 30% rather than 20%, and registration is straightforward. The deductions are still yours to claim either way.
About the author. Chris Neuman is the founder of Taxtful, accountants and advisers to UK construction companies turning over £1m to £15m. Taxtful is construction-only: every client, every template, every conversation. This article is general guidance, not advice on your circumstances; rates and rules change, so check the current position before acting.