Why expenses are central to every CIS refund
Every month a contractor pays a CIS subcontractor, they deduct 20% (or 30% for unregistered workers) and hand it to HMRC as an advance payment against the subcontractor's tax bill. Critically, that deduction is applied to the labour element of the invoice only. The cost of materials is excluded from the deduction base. So if your invoice shows £800 of labour and £400 of materials, the 20% is applied to the £800, not the £1,200 total.
The result is that 20% of your labour income leaves your hands before you have accounted for a single expense, a tool purchase, a tank of diesel, or a penny of insurance premium. Your actual tax liability, once those costs are properly counted, is almost always lower than the advance that has been collected. That gap between what was deducted and what you actually owe is the CIS refund.
Understanding the Construction Industry Scheme and how it works is the starting point, but expenses are where the arithmetic happens. Every allowable expense you record reduces your taxable profit and by extension reduces the tax you owe, widening the refund gap. The subcontractors who miss out on their full refund are, most often, the ones who have not kept track of what they have spent.
For a fuller picture of how refunds are calculated and claimed, see our guide to how to claim your CIS tax refund. The route through to actually recovering the money is the CIS refund service.
Vehicle costs: mileage versus actual expenses
For most construction trades, getting to site and between sites is the single largest expense category. You have two methods for claiming vehicle costs, and you must pick one per vehicle per tax year. You cannot mix them.
The flat mileage rate (AMAP)
Under the Approved Mileage Allowance Payments (AMAP) scheme, you claim a fixed pence-per-mile rate for business journeys in your own vehicle. From 6 April 2026 the rates are:
| Vehicle type | First 10,000 miles | After 10,000 miles |
|---|---|---|
| Car or van | 55p per mile | 25p per mile |
| Motorcycle | 24p per mile | 24p per mile |
| Bicycle | 20p per mile | 20p per mile |
The car and van rate rose from 45p to 55p from 6 April 2026. Any mileage calculator or tax guide still showing 45p is quoting a stale figure for 2026/27. The 25p after-10,000-miles rate is unchanged.
The mileage rate covers everything: fuel, insurance, servicing, tyres, depreciation. You claim the rate and nothing else for that vehicle. The advantage is simplicity: keep a mileage log (date, journey, reason, miles) and the calculation is done. For a subcontractor doing 15,000 business miles in the year, the claim is (10,000 x 55p) + (5,000 x 25p) = £5,500 + £1,250 = £6,750.
Actual van running costs
The alternative is to claim every pound you have spent running the vehicle: fuel, insurance, road tax, MOT, servicing and repairs, finance interest (not capital repayments), and capital allowances on the purchase cost. This is more work to record but can produce a larger deduction, particularly in the first year of ownership when capital allowances on the full purchase price are available.
Vans with a payload above one tonne are classed as commercial vehicles. Unlike cars, vans do not face the private-use restrictions that reduce capital allowances, so the full Annual Investment Allowance applies to the purchase cost. A sole trader buying a £22,000 transit van can deduct the entire £22,000 in year one under the AIA, rather than writing it down gradually.
If the van has any private use (commuting to a fixed yard, personal errands) you must reduce the claim by the private-use percentage. Keep a mileage log even on the actual-costs method, both to calculate any private-use adjustment and to evidence that the journeys were for business.
Which method to choose
For a newer, higher-value van with low mileage in the early years of ownership, actual costs with AIA is usually better. For an older van or for cars, where private use is harder to separate, the flat rate is simpler and often comparable. Your accountant can model the two options against your actual usage before you file.
Tools, plant and equipment
Tools you buy for work are fully deductible. The treatment depends on the cost and type of item.
Small tools bought and used in the year (chisels, drill bits, tape measures, blades, fixings) are treated as revenue expenses and written off in the year of purchase. There is no bright-line figure in the legislation, but HMRC guidance suggests amounts up to a few hundred pounds for individual items are normally revenue. If in doubt, claim it in full.
Larger capital items fall under the capital allowances regime. The Annual Investment Allowance (AIA) currently allows a 100% deduction in the year of purchase for qualifying plant and machinery up to the AIA limit (£1 million per year for most businesses). Practically speaking, almost any tool purchase a sole-trader subcontractor will make falls well within the AIA, so the full cost is deductible in year one. This covers: power tools, impact drivers, concrete mixers, site lighting, scaffolding components, generators, welding equipment, and similar.
Items used partly for personal purposes should be claimed at the business-use percentage only. A drill you genuinely use only for work is 100% claimable. A van-mounted compressor that has never left the van is 100% claimable. A laptop used 70% for work and 30% for personal use is claimable at 70%.
PPE and workwear
PPE and specialist workwear worn because the job requires it are deductible. The rule is that the clothing must be specific to the trade and not suitable for ordinary everyday wear. A hard hat, steel-toed boots, hi-vis vests, gloves, rigger gloves, waterproof trousers, dust masks, safety glasses and harnesses all qualify. A plasterer's set of overalls is claimable.
Ordinary clothing does not qualify, even if you only wear it for work. HMRC will disallow a claim for jeans, t-shirts or everyday trainers. The test is whether the clothing is of a type that could be worn outside the working environment. If it could be, it fails.
Branded workwear with your company name or logo sits in a grey area. The purpose of the branding matters: if it is used for advertising the business rather than personal warmth, HMRC has accepted deductibility in some cases. Get a receipt either way and discuss with your accountant.
Materials: how they interact with CIS deductions
Materials deserve particular attention in a CIS context because they operate on two separate levels.
First, at the point of CIS deduction. The contractor applies the 20% or 30% rate only to the labour component of your invoice. If your payment statement shows a split between labour and materials, or if you can establish that split evidentially, the materials are excluded from the calculation. A £2,000 invoice with £1,200 labour and £800 materials produces a 20% deduction of £240, not £400. If you are invoicing with a single total and the contractor is applying deductions to the whole amount, you should split your invoices explicitly. This is one of the most commonly misunderstood rules in the scheme.
Second, on your Self Assessment return. Even though materials are outside the CIS deduction base, they are still a deductible business expense that reduces your taxable profit. A subcontractor who spends £15,000 on materials across the year and does not record them properly is paying income tax on £15,000 more profit than they should. Keep every supplier invoice and purchase receipt, and match them to the job they relate to.
Phone and communication
A mobile phone used for work is deductible. If you have a separate business phone used entirely for work, the full cost (handset through capital allowances, monthly contract through revenue expenses) is claimable. If you use a single phone for both personal and business use, you can deduct the business-use proportion. Most subcontractors estimate this as a percentage (for example, 70% business use) and apply it to the total annual bill.
Broadband used for quoting, invoicing and communicating with contractors is deductible on the same mixed-use basis. If you work from home, the broadband proportion forms part of the use-of-home calculation below.
Insurance
Trade insurance is fully deductible as a business expense. The types most construction subcontractors carry and can claim include:
- Public liability insurance
- Employers liability insurance (if you have any workers or labour-only subcontractors yourself)
- Plant and tools insurance
- Professional indemnity (for trades with a design element)
- Van or commercial vehicle insurance (but if you are using the AMAP flat rate, insurance is already included in the 55p per mile)
- Income protection insurance (if not a benefit-in-kind through a company)
Personal life insurance and critical illness cover that is not specifically a business protection policy are not deductible. The test is whether the premium is incurred wholly and exclusively for the purposes of the trade.
Training and qualifications
Training costs are deductible when they are for updating or maintaining skills you already have. This covers:
- CSCS card renewal
- First aid renewal (for example SMSTS or SSSTS refresher)
- IPAF or PASMA refresher courses
- Gas Safe, NICEIC or similar renewal training where you are already registered
- Trade refreshers required by your contractor or client
Training that gives you a skill set you did not previously have is treated differently. It is capital in nature (acquiring a new asset, the skill) rather than a current revenue expense, so the deduction may not be available or may be more limited. If you are learning a new trade discipline entirely, take advice before claiming.
Use of home as office
Many sole-trader subcontractors handle their quoting, invoicing, record-keeping and contractor communications from home. Where a room or a proportion of the home is used for these purposes, a deduction is available.
The simplest approach for most subcontractors is HMRC's flat-rate monthly allowance, which uses the number of hours of business use per month:
| Hours of business use per month | Monthly flat rate |
|---|---|
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101 hours or more | £26 |
Alternatively you can calculate the actual proportion of home costs (mortgage interest or rent, council tax, heat, light, broadband, insurance) attributable to business use, based on the number of rooms and the hours of use. This can produce a higher figure if you use a dedicated room for a significant number of hours, but it requires more detailed record-keeping and creates a possible capital gains tax issue if you later sell the property with a room exclusively for business use.
For most construction subcontractors doing their admin in an evenings-only capacity from a shared space, the flat rate is straightforward and the result is the same.
Subsistence and meals on site
Subsistence (food and drink costs when working away from your normal base) is one of the most frequently asked-about and most frequently mis-claimed expenses in construction. The rule turns on whether the site is a temporary workplace.
HMRC treats a workplace as temporary if:
- You attend it for a limited purpose and/or limited duration, and
- The total time you expect to spend there does not exceed 24 months.
If a site qualifies as a temporary workplace, the travel to and from it is deductible (mileage or actual costs), and food and drink costs incurred on-site while away from your base are deductible as subsistence.
If a site becomes a permanent workplace (because you expect to be there for more than 24 months, or because you have no other regular base), neither the travel nor the subsistence is deductible. This catches subcontractors on long rolling contracts at a single development: after 24 months, the site has effectively become your fixed place of work.
One practical point for site workers: subsistence does not mean you can claim every cup of coffee bought near a job. HMRC expects the expenditure to be necessarily incurred away from home and at a higher cost than you would normally incur. Keep receipts and note the reason for the expenditure. A working lunch near a site you drove two hours to reach is reasonable. A coffee bought at a site five minutes from home is not.
What CIS subcontractors typically claim by trade
The mix of expenses varies significantly by trade. The table below gives a guide to the most relevant categories by trade type. Figures are illustrative and will vary with individual circumstances.
| Trade | Dominant expense categories | Notes |
|---|---|---|
| Electrician | Van (55p/mile or actual), tools and test equipment, materials (cable, fixings), NICEIC/ECS renewal, PPE | Test equipment (multimeters, PAT testers) can be a significant capital allowance claim |
| Plumber | Van, tools, fittings and materials on labour-only contracts, Gas Safe renewal, PPE, CIPHE membership | Plumbers on labour-only contracts have lower material costs but higher tool values |
| Joiner / carpenter | Van, power tools (saw, router, planer), timber (on supply-and-fix), workwear, CSCS | High tool turnover means capital allowances are regularly relevant |
| Groundworker | Van or plant hire recharge, PPE (heavyweight: full safety boot, high-cut boot, ear defenders), CPCS/CSCS, materials (on certain jobs) | Plant hire passed to the main contractor as a disbursement needs careful invoicing |
| Roofer | Van, harness and fall-arrest kit, materials (slates, tiles, membrane), PASMA/IPAF, insurance (public liability critical) | PPE spend is higher than most trades; all fall-arrest equipment is claimable |
| Builder / general | Van, wide range of tools, materials on small-to-medium jobs, CSCS, use of home (for quoting and admin) | Material spend varies widely by contract type; always split on invoices |
| Gas engineer | Van, Gas Safe registration and annual fee, diagnostic tools, PPE, ongoing CPD courses | Gas Safe registration fee is a business expense; treated as a trade subscription |
| Painter and decorator | Van, consumables (brushes, rollers, masking tape), paint on supply-and-fix, PPE (respiratory, overalls), CSCS | Consumables are revenue expenses; record individually by job where possible |
| Scaffolder | Van, NASC/CISRS card renewal, PPE (helmet, harness, boots), tools, subsistence on multi-day away jobs | Subsistence is particularly relevant for scaffolders travelling to jobs across the country |
| Civil engineer | Van or mileage on larger vehicles, surveying and measuring equipment, PPE, professional memberships, training | Memberships (CIOB, RICS for site staff) are deductible if directly relevant to your work |
Sole trader vs limited company: who claims what and how
The expenses themselves are broadly the same regardless of structure, but where and how you claim them differs.
As a sole trader, all expenses are deducted on your annual Self Assessment return (SA103 supplementary pages). Your CIS refund is calculated as part of that return: total tax liability after expenses and personal allowance, offset against total CIS deducted in the year. If the deducted amount exceeds the liability, HMRC repays the difference. The earliest you can file is 6 April after the tax year ends; repayments normally arrive within 4 to 8 weeks of filing. The average CIS sole-trader refund is typically in the range of £2,000 to £3,000 (an illustrative market figure, not a guarantee), though the actual amount depends entirely on your gross CIS income, your expense level, and your other income.
As a limited company director, your company claims the expenses against corporation tax. The CIS recovery mechanism is different: rather than waiting for a year-end Self Assessment refund, the company can offset CIS deductions suffered against its PAYE and CIS employer liabilities in real time, through the Employer Payment Summary (EPS). This is considerably faster than the sole-trader route. The full mechanics are covered in our guide to CIS: sole trader or limited company.
Whichever structure you use, record-keeping is the foundation. No receipt, no claim. Keep digital or paper records for five years after the relevant filing deadline and match expenses to the periods in which they were incurred.
A worked example: sole trader plasterer, 2026/27
To show how expenses translate into a refund, consider a sole-trader plasterer with the following 2026/27 figures:
| Item | Amount |
|---|---|
| Gross CIS invoices (labour only) | £45,000 |
| Materials invoiced separately (outside CIS base) | £8,000 |
| CIS deducted at 20% on labour (£45,000 x 20%) | £9,000 |
| Van mileage: 12,000 miles (10,000 x 55p + 2,000 x 25p) | £6,000 |
| Tools and equipment | £1,800 |
| PPE and workwear | £400 |
| Phone (70% business) | £350 |
| Public liability insurance | £600 |
| Use of home (101+ hours/month, 12 months) | £312 |
| CSCS card renewal and training | £180 |
| Total expenses | £9,642 |
| Gross CIS income | £45,000 |
| Less: total expenses | -£9,642 |
| Taxable profit | £35,358 |
| Personal allowance (2026/27) | -£12,570 |
| Income subject to tax | £22,788 |
| Income tax at 20% | £4,558 |
| Class 4 NIC (6% on £22,788) | £1,367 |
| Class 2 NIC (profits above £7,105: treated as paid, nothing due) | £0 |
| Total tax and NIC liability | £5,925 |
| CIS already deducted | £9,000 |
| Estimated refund | £3,075 |
The materials (£8,000) are excluded from the CIS deduction base and also reduce profit through Self Assessment, though they are not shown as a direct deduction in this simplified example (they flow through gross profit on more detailed accounts). The main point is that without the £9,642 of expenses, the tax liability would be higher and the refund would be smaller or eliminated.
Common mistakes to avoid
Several patterns come up repeatedly when reviewing CIS subcontractors' tax positions.
Using the old 45p mileage rate. The AMAP rate for cars and vans has been 55p per mile (first 10,000) since 6 April 2026. Using 45p understates the claim by 10p per mile, which over 10,000 miles is £1,000 in unclaimed deductions.
Not splitting labour and materials on invoices. If a contractor applies the CIS deduction to your full invoice total instead of the labour element only, you are effectively paying 20% on money that should be excluded from the calculation. Invoice clearly with labour and materials shown separately.
Missing capital allowance claims. Subcontractors who buy a significant tool or a van and then write off only its fuel and running costs are leaving a substantial deduction unclaimed. The purchase price itself is deductible through capital allowances, often in full in year one under the AIA.
Treating the 24-month rule casually. A long-running site contract that tips past 24 months turns the site into a permanent workplace. Once it does, mileage and subsistence to and from that site lose their deductibility. Keep a note of start dates on each contract.
Not keeping mileage logs. The mileage rate is one of the largest claims most subcontractors can make, but HMRC requires a contemporaneous record of each journey. A logbook or an app that records date, start point, destination, purpose and miles is the minimum. Reconstructing a year of journeys from memory does not satisfy the requirement.
Record-keeping for CIS expense claims
HMRC expects you to keep records for at least five years after the 31 January Self Assessment deadline for the relevant tax year. For 2026/27 (filed by 31 January 2028), that means keeping records until at least January 2033.
The records you need:
- All purchase invoices and receipts (physical or digital)
- A mileage log for every business journey (date, start and end points, purpose, miles)
- CIS payment and deduction statements from each contractor who paid you
- Bank statements showing income and expenditure
- Records of any capital items purchased (invoice plus description of business use)
Accounting software (QuickBooks, Xero, FreeAgent and others) makes this straightforward: photograph receipts as you go, categorise them, and the records build automatically. From April 2026 sole traders above the £50,000 income threshold are in scope for Making Tax Digital for Income Tax, which mandates digital record-keeping and quarterly updates via MTD-compatible software. Even if you are below the threshold now, building the digital habit early saves disruption later.
Getting your refund
Expenses are the mechanism; the refund is the outcome. Most CIS subcontractors are owed money back every year because 20% of their labour income is taken before expenses are counted. Claiming everything you are entitled to is how you recover what is rightfully yours.
If you are a sole trader, you claim through Self Assessment. If you are a limited company, the EPS route allows much faster recovery. Either way, the quality of your records determines the size of the claim.
To see how your expenses change the final bill, run your figures through our CIS Self Assessment calculator. It applies the 2026/27 rates and shows the refund moving as you add each expense category.
Our CIS refund service handles the full process: gathering your payment statements, reviewing your expenses, preparing and filing the return, and chasing HMRC for the repayment. For most clients the refund more than covers the cost of the accountant. If you want to understand the full refund picture for your structure, see our guide on CIS sole trader vs limited company and how the recovery route differs between the two.