Unallocated Credit on Your HMRC Account: How to Reclaim CIS Deductions

What "unallocated credit" actually means

When you log into your HMRC Business Tax Account and see a credit sitting under your PAYE or Corporation Tax record with a label along the lines of "unallocated" or "credit available", it means HMRC holds that amount on your account but has not yet matched it to a specific liability or triggered a repayment. The money is not lost, it has not been rejected, and it is not a duplicate. It is in a holding state while HMRC completes its reconciliation.

For CIS subcontractors operating through a limited company, unallocated credits arise most often in two situations. The first is an in-year mismatch, where an EPS has been filed reporting a CIS offset but the figure does not line up with what the contractor reported on their CIS300 monthly return, so HMRC parks the credit pending resolution. The second is a year-end position, where the credit is sitting on the PAYE account because the company has not yet submitted its repayment claim; the excess stays parked until the claim is made.

Neither situation is a crisis, but both require action to move the credit from "unallocated" to "applied" or "repaid".

How the limited-company recovery route works

A limited company registered under CIS as a subcontractor can offset the deductions it suffers against its monthly PAYE and NIC obligations using the Employer Payment Summary. Each tax month, the company reports the total CIS withheld by contractors in that period on the EPS. HMRC reduces that month's PAYE remittance by the same amount, so instead of paying the full payroll bill the company pays only the net difference.

If the CIS credit in a given month exceeds the PAYE due, the surplus carries forward automatically. An EPS in a month with zero PAYE due is still required to bank that month's credit. If the EPS is not filed in a nil-PAYE month, the credit for that month is not recorded and will not accumulate until a correcting submission is made.

Our guide to CIS limited company EPS reclaim covers the filing mechanics and month-by-month worked examples in full.

Why credits stall: the three most common causes

1. Mismatch between your EPS and the contractor's CIS300

The figure you report in the "CIS deductions suffered" field on the EPS must match what each contractor reported for your company on their monthly CIS300 return. HMRC checks the EPS figures against the contractors' monthly returns and will query or withhold the credit where they do not match.

The mismatch can run in either direction. Contractors sometimes report payments using the wrong UTR for your company, or they use the company registration number instead of the UTR. Less commonly, the deduction amount on the CIS300 differs from the amount on the deduction statement they gave you, which is the figure you used for the EPS. Either way, the resolution is to contact the contractor, confirm the exact figures they filed on their CIS300, and then file a correcting EPS if your submitted figure was wrong. If the error is on the contractor's side, they need to amend their CIS300.

The figures to check against come from your CIS payment and deduction statements. Each statement must show the gross payment, the materials element, the CIS deduction rate and the exact pound amount deducted. That deduction amount is what goes on the EPS, and it must match what the contractor filed.

2. Wrong employer PAYE reference on the EPS

The EPS is filed against your PAYE employer reference (in the format 123/AB45678). If the EPS goes in under a different reference, or if the company has more than one PAYE scheme reference and the wrong one is selected, HMRC does not apply the credit to the scheme you intended. The credit sits unmatched.

Check that your payroll software is filing EPS submissions against the correct and only PAYE reference for the company. If the company was formerly under a different reference and migrated, confirm with HMRC's employer helpline (0300 200 3200) which reference is currently active and that historic EPS filings were received under it.

3. Missing an EPS in a nil-PAYE month

Some cloud payroll packages do not prompt for an EPS in months where the PAYE liability is zero, on the assumption there is nothing to report. If CIS deductions were suffered in that month, the EPS still needs to be filed to record the credit. A missed EPS means that month's CIS deduction is not reported to HMRC and the credit is not accumulated. The fix is a correcting EPS for the affected month, which can be filed at any point in the tax year (or after it, though the sooner the better).

See also our guide to CIS monthly returns for the filing calendar and what each submission type covers.

How to chase a repayment: practical steps and realistic timelines

Step 1: Confirm the credit is actually there

Log into the HMRC Business Tax Account or the PAYE for Employers online service. Under "Payments and liabilities" you should be able to see what HMRC holds on the account. If you are looking for a year-end refund, check both the PAYE account and the Corporation Tax account, since the credit may have moved from one to the other after the 5 April position was calculated.

Step 2: Make the year-end claim and allow a realistic window

For a limited company, the year-end excess is not released automatically. After filing the final EPS for the tax year, submit a claim through HMRC's online service (Government Gateway) or by post, marked "CIS", to PT Operations North East England, HM Revenue and Customs, BX9 1BX. State the company name, PAYE reference, and the amount reclaimed, and say whether you want a bank repayment or an offset against Corporation Tax, VAT or another liability.

HMRC does not publish a firm processing target. In practice claims take roughly 4 to 12 weeks, and HMRC asks you not to chase until around 40 working days after submission. Note the date you claimed before picking up the phone.

Step 3: Phone versus webchat

For CIS and PAYE employer queries, the employer helpline is 0300 200 3200 (Monday to Friday, 8am to 6pm). This is the more reliable route for anything that requires an agent to look at your account and take an action, such as releasing a credit that has been held pending a reconciliation query, or confirming that a correcting EPS has been received and processed.

HMRC's webchat is available through the Business Tax Account and is faster for straightforward queries such as confirming whether a submission was received or checking the status of a payment. It cannot release held credits or trigger repayments directly. If the webchat agent says the credit is there but cannot explain why it is unallocated, ask for a reference number and follow up on the phone line with that reference ready.

Step 4: File a correcting EPS if the mismatch is yours

If the credit is being withheld because your EPS figure was wrong, a correcting EPS is the resolution. Most payroll software allows you to resubmit an EPS for a previous period. File the correction with the accurate CIS deductions suffered figure, then contact HMRC to flag that the correction has been submitted. Have the contractor's CIS300 figures to hand when you call.

The year-end position: claim it, then choose refund or offset

Any CIS credit not absorbed against PAYE and NIC during the tax year sits as an excess at 5 April. It stays on the PAYE account until the company claims it. On the claim you choose whether to take a cash repayment or ask HMRC to offset the amount against Corporation Tax, VAT or another liability.

For example: a company has a CT liability of £8,000 for the year ending 31 March 2027 and an unabsorbed CIS credit of £11,000. It can ask HMRC to set £8,000 against the CT bill and repay the remaining £3,000, or take the full £11,000 as a repayment and pay the CT separately. Either way, nothing happens until the claim is submitted, so file the final EPS and make the claim promptly after 5 April.

Corporation Tax rates for 2026/27 are 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between those thresholds. The CIS credit reduces the cash payment; it does not change the rate or the taxable profit calculation.

Sole traders: the Self Assessment route

Sole traders operating under CIS cannot use the EPS route at all. The EPS is a PAYE mechanism and requires the company to have a PAYE scheme. A sole trader's only route to recovering CIS deductions is the Self Assessment return for the relevant tax year.

The total CIS deducted across all contractors for the year goes in the CIS deductions box on the self-employment pages of the return. HMRC offsets that against the overall income tax and National Insurance liability. Because the 20% CIS rate is taken from labour income before expenses, the personal allowance and any losses are deducted, most registered subcontractors overpay and are owed a refund.

The timing disadvantage is significant. The 2026/27 tax year ends 5 April 2027. The Self Assessment return is not due until 31 January 2028. A sole trader who files at the deadline waits nearly 22 months to recover a deduction suffered in April 2026. Even an early filer is waiting close to a year on the earliest deductions in the year. A limited company using the EPS correctly recovers each month's deduction within 30 days.

That timing difference does not by itself justify incorporation. The additional costs of a limited company (CT filing, employer NIC at 15% above £5,000 from April 2025, dividend tax at 10.75% basic rate for 2026/27, accountancy fees) need to be weighed against the cash-flow benefit. For a sole trader with large monthly CIS deductions, the locked capital is real and it is worth modelling the comparison.

Preventing the problem: record-keeping that stops credits stalling

Most unallocated credit problems trace back to one of two gaps: a missing deduction statement, or an EPS filed with a figure that was never cross-checked against the contractor's submissions. Both are avoidable.

• Collect each CIS payment and deduction statement as payments arrive, not at year end. File by contractor and by tax month.
• Cross-reference each statement against the bank record of the net payment received. The gross on the statement minus the deduction should equal the bank credit.
• Before filing each EPS, total the deduction figures from statements for that tax month and enter that total, not an estimate or a rounded figure.
• File an EPS every month, including months with zero PAYE due, if CIS was suffered in that period.
• At year end, ask each contractor to confirm the CIS300 figures they filed for your company. A 10-minute email exchange before filing the final EPS prevents a months-long query with HMRC.

If your HMRC account currently shows an unallocated CIS credit and you are not sure why, the place to start is a reconciliation of your EPS submissions against the deduction statements you hold, compared to what each contractor's CIS300 reported. That comparison will almost always identify the source of the hold.

For companies where the credit is significant or the reconciliation is complex, specialist CIS accountancy support covers exactly this type of in-year and year-end recovery work. See our CIS refund service for details of what is included.

What to have ready when you contact HMRC

• Your PAYE employer reference (for EPS and PAYE queries).
• The company UTR (for Corporation Tax and CT account queries).
• The tax months in question and the EPS submission dates.
• The total CIS suffered as reported on each EPS.
• The contractor names and UTRs for anyone whose CIS300 you believe differs from your EPS.
• Any reference numbers from previous calls or webchat sessions.

Having the CIS deduction statements in front of you during the call means you can give exact figures rather than approximations, which substantially reduces the risk of being asked to call back with more information.