As a subcontractor who operates under the Construction Industry Scheme (CIS) you will have deductions offset against your invoices to contractors – typically at 20% although you can be gross registered and have no deductions if your turnover is large enough.
Self-employed subcontractors simply claim back the CIS tax – net of the income tax they already owe – in their annual self-assessment tax return.
However, limited company subcontractors currently have to report their deductions on the PAYE year end return known as the P35 return. These deductions can then be reclaimed by writing to HMRC, after the P35 has been submitted, and requesting that a repayment be issued.
However, the new Real Time Information (RTI) approach to PAYE, which comes into force from April 6th 2013, has abolished the end of year returns and instead employers must submit either a Full Payment Submission (FPS), for everytime a payroll payment to employees is made thus recording wage, tax and NIC amounts, or an employer payment summary (EPS) for things such as sick/maternity pay etc and for recording CIS deductions suffered.
The EPS will therefore be submitted monthly and you will still have to file your monthly CIS return if you are a contractor yourself making payments to and taking deductions from subcontractors.
The process of reclaiming any CIS tax owed from HMRC then appears to be the same outlined above in regards to the P35 – writing a letter to HMRC requesting the repayment. We have not found any guidance as of yet that indicates that this will change.