CIS deductions taken from a limited company's construction income are advance payments, but the company does not normally put them through its Corporation Tax return as a simple refund claim. HMRC explains that a limited company uses its payroll scheme: it records the deductions against qualifying monthly or quarterly PAYE/CIS liabilities through an Employer Payment Summary (EPS).
The key discipline is records. Keep every contractor payment and deduction statement, reconcile the year-to-date deductions to the payroll/EPS record, and investigate differences before they become a year-end reconstruction exercise.
Monthly or quarterly working process
- Gather payment and deduction statements received from contractors.
- Record the gross income and CIS deduction separately; do not treat net bank receipt as the whole record.
- Confirm the company's PAYE/NIC, student-loan and any CIS liabilities for the period.
- Submit payroll information as normal and record the year-to-date CIS deduction on the EPS.
- Set off the eligible CIS amount against the qualifying liabilities, then pay any balance by the usual due date.
- Carry an unused excess forward only in line with current HMRC rules and the same tax-year record.
What happens to an excess?
HMRC says an excess that cannot be set off during the tax year may, after the final payroll submissions have been received, be repaid or set against Corporation Tax due. That is not a reason to skip the monthly record: the company needs the evidence and the correct EPS treatment throughout the year.
Keep these records together
- Contractor payment and deduction statements.
- Payroll reports and the relevant FPS/EPS evidence.
- A month-by-month set-off schedule showing opening balance, deductions suffered, amount used and carried balance.
- Evidence of any correction or query with a contractor/HMRC.
This guide is for limited companies. Sole traders and partners use a different CIS deduction route through Self Assessment. If the company is unsure whether deductions were correct, whether an EPS adjustment is valid or how an excess applies, obtain payroll/tax advice before submitting.
Related FoxSums resources
- CIS for Construction and Trades: Contractor and Subcontractor Guide
- Monthly CIS Contractor Checklist
- CIS Labour and Materials: What Gets Deducted?
- How to Read Monthly Management Accounts
Next step
Keep deduction statements and payroll evidence together, then check the current limited-company claim route before acting.
Important
General information only. Check the facts and current official guidance for the business’s circumstances.
Sources and review
- Evidence check date: 2 November 2026. This is a specialist construction and trades resource; it is not presented as general small-business compliance guidance.
- GOV.UK - CIS contractor deductions and payment statements
- GOV.UK - CIS monthly returns
- GOV.UK - CIS340