Why Set-Offs & Refunds Matter

Under the Construction Industry Scheme (CIS), contractors deduct tax at source from subcontractors. But what happens when deductions don’t align with actual liabilities?

For companies, sole traders, and subcontractors, the rules around CIS set-offs and refunds are often misunderstood. Get them wrong, and you could face delayed repayments, cash flow blockages, or HMRC disputes.

In this article, we explain how CIS deductions can be offset against PAYE/NIC, when refunds apply, and why professional support is essential for smooth cash flow management.

CIS Set-Offs for Contractors

Contractors can offset certain CIS deductions against their own liabilities:

• PAYE Income Tax owed for employees.

• Employer NIC contributions.

• Apprenticeship Levy (if applicable).

This reduces the amount payable directly to HMRC. Contractors must keep accurate records and ensure the set-off is declared correctly through their payroll system.

🔗 HMRC: CIS for Contractors – PAYE Set-Offs

Excess Deductions & Refunds for Subcontractors

For subcontractors (particularly limited companies):

• If too much CIS tax has been deducted, it can either be:

  • Offset against PAYE/NIC liabilities, or

  • Claimed back as a refund from HMRC at year-end.

• Refunds are not automatic — subcontractors must apply and provide accurate CIS statements as proof.

👉 Many subcontractors suffer cash flow delays here, waiting months for HMRC to process claims if their paperwork isn’t perfect.

🔗 HMRC: CIS Repayments for Subcontractors

CIS132: Record-Keeping Requirements

Contractors must complete Form CIS132 when offsetting CIS deductions against PAYE/NIC. This record must:

• Detail amounts deducted from subcontractors.

• Show how they’ve been applied against PAYE/NIC.

• Be kept for inspection if HMRC investigates.

Failure to maintain proper CIS132 records can lead to disputes, penalties, and refusal of set-off claims.

Common Cash Flow Risks

• Contractors over-claiming set-offs → leading to HMRC challenges.

• Subcontractors waiting on refunds → projects stall due to lack of working capital.

• Mismatched records → HMRC delays repayments until reconciliations are complete.

How Wexley Protects Clients

At Wexley & Associates, we:

• Manage CIS set-offs seamlessly within PAYE systems.

• Handle CIS132 records so they’re always HMRC-compliant.

• Secure faster refunds for subcontractors by preparing watertight claims.

• Advise companies on structuring pay to minimise CIS cash flow issues.

With our proactive support, clients avoid repayment delays, keep cash flow moving, and protect their HMRC standing.

Unlock Your CIS Refunds Faster

CIS deductions don’t need to strangle your business cash flow. With expert management, set-offs and refunds can be handled efficiently, ensuring you only pay what’s due — and recover what’s yours.

👉 Contact Wexley & Associates today to take control of your CIS set-offs, refunds, and compliance.

References

• HMRC: CIS 340 – Construction Industry Scheme: Guide for Contractors and Subcontractors

• HMRC: CIS Repayments for Subcontractors

• Related Wex Insider article: CIS Subcontractor Statements: What Contractors Must Provide