CIS for Limited Companies: How It Works and How to Claim Your Deductions Back

If your limited company works as a CIS subcontractor, the deduction rates are the same as for sole traders — but everything else is different. The way you reclaim deductions, the forms you use, and the system that processes your money all work through a completely separate route. Get it wrong and your money sits with HMRC indefinitely.

Published by QuoteDone Editorial Team · Aligned to HMRC 2026/27 tax year

Be honest: are the CIS guides you've been reading written for you — or for a sole trader?

Most of the CIS guides you'll read online are written for sole traders. The registration process, the Self Assessment route, the refund calculation — it all assumes you're a self-employed individual filing a personal tax return. If you operate through a limited company, those guides don't fully apply to you.

Your company is subject to the same CIS deduction rates. Your contractors verify your company the same way. Your deduction statements look the same. But from the moment the money leaves your invoice and sits with HMRC, the process of getting it back is entirely different — and using the wrong route is one of the most common and costly mistakes directors make.

The simplest way to picture it: think of the EPS as a running tab with HMRC. Every month, the CIS your company has already had taken off its invoices is knocked off what the company owes HMRC for payroll. Whatever is still on the tab when the tax year ends is money HMRC owes your company back.

Sole Trader vs Limited Company: The Reclaim Route Is Completely Different

The deduction rates are identical. The registration process is similar. But the reclaim route is completely different:

How to Register Your Limited Company for CIS in 6 Steps

Your limited company registers for CIS separately from any personal registrations. Even if you're already registered as a sole trader subcontractor with your own UTR, your company needs its own CIS registration.

1. Log in to your HMRC business tax account via Government Gateway — use the company's Government Gateway credentials, not your personal ones.
2. Navigate to the Construction Industry Scheme section.
3. Register the company as a subcontractor using form CIS305 (online or postal).
4. You'll need: the company UTR, Companies House registration number, and National Insurance numbers for each director.
5. HMRC verifies the company — registration typically processes within a few working days online.
6. Give your contractor the company UTR and company name — they verify the company with HMRC before making payments.

How Your Company Reclaims CIS: The 3-Step EPS Route

This is the process that most directors either don't know about or get wrong. Here's how it works:

Step 1: Collect Your Deduction Statements

Every contractor who pays your company must give you a CIS payment and deduction statement for every payment. These show the gross amount, the materials excluded from deduction, the CIS deduction, and the net payment. Your company needs these to support every EPS submission — HMRC cross-references them.

Step 2: Submit Your Monthly EPS

Each tax month, alongside your regular payroll submission, your company submits an Employer Payment Summary (EPS) to HMRC through your payroll software. On the EPS, you declare the total CIS deductions your company has suffered year-to-date (cumulative from 6 April, not just the current month).

The EPS reduces the amount your company pays to HMRC each month. Instead of paying the full PAYE and NIC liability, you pay the net amount after CIS deductions are offset. This is the cash flow benefit of doing the EPS correctly — you keep more money in the company every month instead of waiting for an annual refund.

Step 3: After Year-End, Claim Any Surplus Back From HMRC

At the end of the tax year (5 April), your company may still have unrecovered CIS deductions — because the total CIS suffered exceeded total PAYE and NIC liabilities for the year. That surplus doesn't disappear, but it isn't handled on your Corporation Tax return either. Once the tax year has ended, you make a separate claim to HMRC: either for a repayment, or for the surplus to be set against the company's other tax liabilities, such as Corporation Tax or VAT.

Why Your Company Needs a PAYE Scheme — Even With No Employees

To submit an EPS, your company needs to be registered for PAYE with HMRC. This is a legal requirement for companies with employees — but it also applies to companies that want to use the EPS route to reclaim CIS deductions.

A limited company director who pays themselves only through dividends (with no salary, no employees, no PAYE scheme) technically has no EPS to submit — and therefore no monthly reclaim route. The CIS deductions sit unused instead of being offset month by month.

In practice, many construction company directors pay themselves a small salary (often set around the National Insurance lower earnings limit) specifically to maintain a PAYE scheme and enable the monthly EPS offset. The salary is minimal, the PAYE liability is minimal, but the EPS mechanism becomes available — allowing monthly CIS offsets that significantly improve cash flow.

Gross Payment Status: How Your Company Can Keep 100% of Every Invoice

Limited companies can apply for gross payment status (0% CIS deduction) on the same basis as sole traders. To qualify, the company must pass three HMRC tests:

The compliance test is more demanding for limited companies because it covers Corporation Tax, PAYE, and VAT — not just income tax. A single late VAT return can fail the application. HMRC reviews GPS regularly, so maintaining compliance is ongoing, not a one-time requirement.

Contractor and Subcontractor at the Same Time: How the Two Sides Net Off

Many limited companies in construction are both subcontractors (receiving CIS deductions on their income) and contractors (deducting CIS from payments they make to their own subcontractors). This creates a two-sided position:

• On the income side: CIS deducted from your invoices by main contractors — reclaimed via EPS
• On the payments side: CIS you deduct from your subcontractors' invoices — reported on your monthly CIS return and paid to HMRC
• The CIS your company suffers can be set against what it owes HMRC through the PAYE system, keeping the monthly payments to HMRC accurate

Records Your Company Must Keep

• CIS payment and deduction statements — from every contractor, every tax month
• Monthly EPS submissions — records of what was declared and when
• Full Payment Submissions (FPS) — payroll records for the year
• CIS monthly returns (if you also pay subcontractors)
• Company accounts — must show CIS income clearly
• Year-end repayment or set-off claims — what you claimed from HMRC and when

HMRC cross-references all of these. Mismatches between deduction statements, EPS filings, and your company's records are a common trigger for compliance checks. The figures must reconcile exactly — any gap invites questions.

7 Costly CIS Mistakes Limited Companies Make

• Putting CIS suffered on the CT600 — CIS goes on the monthly EPS; any year-end surplus is claimed from HMRC separately. HMRC warns that claiming through the Corporation Tax return can lead to a penalty
• Treating CIS as a Corporation Tax deduction — it must go through EPS/PAYE first
• Using the director's personal UTR instead of the company UTR — contractors verify the company, not the individual
• Not having a PAYE scheme — no PAYE scheme means no EPS, no monthly offset
• Missing monthly EPS submissions — deductions accumulate without being offset, creating unnecessary cash flow pressure
• Not keeping deduction statements — HMRC checks these against EPS declarations
• Not registering the company separately — the company's CIS registration is separate from any sole trader registration the director holds

Your Limited Company CIS Checklist

• Register the company for CIS using the company UTR
• Set up a PAYE scheme if you don't have one — required for EPS submissions
• Give contractors the company name and company UTR for verification
• Collect CIS payment and deduction statements every tax month
• Submit EPS monthly showing year-to-date CIS deductions suffered
• Reconcile EPS declarations with deduction statements each month
• After 5 April, check for unrecovered surplus and claim it from HMRC separately — not on the CT600
• Apply for gross payment status once compliance record is clean for 12 months

This article is for informational purposes only and does not constitute formal accounting, tax, or legal advice. CIS rules for limited companies are complex — always consult a qualified accountant familiar with construction industry tax before making decisions. Aligned to 2026/27 HMRC guidance.