CIS accounting

CIS and company accounting for subcontracting limited companies.

A limited company that operates as a CIS subcontractor sits in one of the most technically complex positions in UK construction tax. The company suffers 20% deductions on its labour income from the contractors above it. If it then pays its own subcontractors, it has a full contractor-side obligation too: monthly CIS300 returns, verification duties and the April 2026 due-diligence requirements. On top of that, the directors need to extract profit tax-efficiently from a company that may carry significant CIS deductions as a cash-flow pressure. Each layer requires specialist handling: the EPS reclaim mechanism for in-year recovery, the per-director GPS turnover test, dividend planning at 2026/27 rates and the monthly contractor-cycle compliance where applicable.

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£30,000

GPS turnover test per director (net of materials)

10.75%

Dividend tax rate, basic rate (2026/27)

25 days

HMRC EPS/CIS company repayment target (working days)

Illustrative figures drawn from the CIS rules set out on this page. Your own position will differ.

The specific challenges

What makes subcontracting limited companies accounting different.

Operating on both sides of CIS at once

A subcontracting limited company that also pays its own subbies is simultaneously a CIS subcontractor (suffering deductions from above) and a CIS contractor (making deductions below). Managing the HMRC offset position, running the EPS reclaim against the PAYE/CIS liability and filing monthly CIS300 returns for the contractor side requires keeping the two positions clearly separated in your records. A mismatch in either direction creates underpayments or missed reclaims.

EPS in-year reclaim: the cash-flow difference

A limited company suffering CIS deductions can recover them in real time via the Employer Payment Summary, offsetting CIS suffered against the company's PAYE and employer NIC liability each month. Many construction companies do not use this mechanism and instead wait 12 to 18 months for recovery through the Corporation Tax return. The EPS route eliminates the cash-flow gap. HMRC says it will usually respond to a limited-company CIS repayment claim within 8 weeks, and the monthly offset itself is not a claim at all, so nothing is queued.

GPS: the per-director turnover test

For a limited company, the GPS turnover test requires net annual CIS turnover of £30,000 per director OR £100,000 in total (whichever is met first). Net turnover excludes VAT and materials, consistent with the labour-only deduction base. A two-director company needs either both directors to hit £30,000 each or the company to reach £100,000 in total. Understanding where your company sits relative to this test determines whether GPS is currently achievable and what the route looks like.

Dividend extraction at 2026/27 rates

Director-shareholders in CIS limited companies typically extract profit through a combination of salary and dividends. For 2026/27, FA 2026 s.4 sets dividend tax rates at 10.75% (basic rate band), 35.75% (higher rate) and 39.35% (additional rate), with a £500 annual allowance. With employer NIC at 15% on earnings above £5,000 and Corporation Tax at 25% (main rate) or 19% (small profits), the extraction model for a CIS limited company needs annual review.

How we help

What we do for subcontracting limited companies.

EPS CIS reclaim setup and monthly operation

We configure the EPS reclaim mechanism for your payroll software, calculate the monthly CIS deduction suffered to offset against your PAYE/NIC liability, and submit the EPS within the payroll deadline cycle. Where your CIS deductions exceed the monthly PAYE liability, the surplus carries forward, and we manage the year-end repayment claim with HMRC, which says it will usually respond within 8 weeks.

GPS application and per-director qualification assessment

We calculate your company's net CIS turnover correctly (excluding VAT and materials) and map it against the per-director and company-total tests. Where your company qualifies, we manage the GPS application across all three tests (business, turnover and compliance) and maintain the documentation record that protects status under the April 2026 anti-fraud rules.

Contractor-side CIS returns where applicable

Where your company pays its own subcontractors, we run the full contractor-side compliance cycle: monthly CIS300 returns by the 19th, nil returns in stop months, subcontractor verification and the April 2026 due-diligence records (CIS re-verification, Companies House check, bank name verification).

Director extraction planning

We model the optimal salary-dividend split for each director at current rates (dividend 10.75% / 35.75% / 39.35%, employer NIC 15% above £5,000, CT 25% / 19%) and produce an extraction plan that is reviewed annually as both the company's profit position and the legislative backdrop change.

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“We did not realise we could reclaim CIS deductions in-year rather than waiting for the CT return. Once the EPS mechanism was set up properly, the difference in monthly cash flow was material.”

Director, specialist groundworks limited company, East Midlands

Illustrative scenario, not a record of a real engagement. Name and figures are examples. The tax mechanics are real.

Questions from subcontracting limited companies

Our company suffers CIS deductions from main contractors. How do we get that money back in-year rather than waiting for year-end?

Via the Employer Payment Summary. Each month, your company can offset the CIS deductions it has suffered against its PAYE and employer NIC liability and remit only the net amount to HMRC. If CIS suffered exceeds your PAYE/NIC liability in a given month, the surplus carries forward automatically to the next month, and any credit still unabsorbed at the year end is reclaimed from HMRC, which says it will usually respond to that claim within 8 weeks. We set up the mechanism and run it monthly so you are not carrying unnecessary deductions on your balance sheet.

We are a two-director company. What do we each need to earn to qualify for GPS?

The limited-company GPS turnover test requires either £30,000 of net CIS turnover per director, OR £100,000 in total for the company. Net turnover excludes VAT and materials. If both directors are actively earning CIS income, each needs to reach £30,000 individually. Alternatively, if the company's total net CIS turnover reaches £100,000, the test is met regardless of how it splits between directors. We calculate your position correctly and tell you which threshold is within reach and over what timeframe.

What dividend rate should we be using in our 2026/27 planning?

FA 2026 s.4 set the 2026/27 dividend rates at 10.75% (basic), 35.75% (higher) and 39.35% (additional), with a £500 annual allowance. If anyone is using the pre-2026 rates of 8.75%, 33.75% or 38.1%, those are now out of date and your planning figures will be wrong. We use the correct current rates in all extraction modelling.

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Plumbers Electricians Joiners and Carpenters Groundworkers Roofers

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