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Business Funding While Waiting for a CIS Tax Refund: UK Contractor Guide

By Jodhbir Mehmi | Mehmi Financial Group
Research updated: 25 October 2026

UK construction subcontractors waiting for a Construction Industry Scheme (CIS) tax refund may be able to access business funding to cover wages, materials, equipment costs and other operating expenses before HM Revenue and Customs (HMRC) processes their repayment.

For many construction businesses, CIS deductions create a significant working capital challenge.

A subcontracting company might generate £500,000 in annual revenue while having tens of thousands of pounds deducted from payments under the Construction Industry Scheme.

Some of those deductions can be used against qualifying tax liabilities, and any eligible excess may eventually be refunded.

However, the business may still need to pay employees, purchase materials, maintain equipment and complete construction projects while waiting for the money.

Business loans, revolving credit facilities, invoice finance and certain asset-backed funding arrangements may help bridge this cash flow gap, depending on the business's financial circumstances and lender eligibility.

There is an important distinction: an expected CIS refund is not automatically an approved, transferable or financeable asset. A lender may consider it when assessing repayment prospects, but the business must still demonstrate a credible way to repay any borrowing.

This guide explains how CIS tax refunds work, how long repayments may take, what financing options are available to UK construction businesses and how to avoid excessive borrowing costs while awaiting HMRC.

Can You Get Business Funding While Waiting for a CIS Tax Refund?

Yes. Eligible UK construction businesses may qualify for commercial financing while waiting for a CIS tax refund. However, approval depends on lender underwriting, business cash flow, creditworthiness and the reliability of the proposed repayment plan.

Some providers may consider a documented expected tax repayment as part of the overall financial assessment.

Others may place greater emphasis on the company's trading performance, existing invoices, equipment or other available assets.

Possible financing options include:

Short-term business loans.
Unsecured working capital loans.
Revolving business credit facilities.
Invoice factoring and invoice discounting.
Asset-backed lending.
Equipment refinancing.
Certain specialist short-term bridging arrangements.

There is no universal UK lending product that guarantees an advance against every pending CIS repayment.

The amount shown in a tax calculation or repayment claim does not necessarily equal the amount HMRC will release to the business.

Before borrowing, contractors should establish whether the refund has been properly calculated, whether the claim has been submitted and whether HMRC may apply deductions against other tax obligations.

What Is a CIS Tax Refund?

A CIS tax refund arises when the deductions taken from a subcontractor's payments exceed the tax liabilities against which those deductions are ultimately applied.

Under the Construction Industry Scheme, contractors make deductions from qualifying payments to subcontractors and report those deductions to HMRC.

The deductions count as advance payments towards the subcontractor's tax obligations.

The standard CIS deduction rates are:

20% for registered subcontractors paid under deduction.
30% for subcontractors who are not properly registered or verified.
0% for subcontractors with gross payment status.

The deduction is not necessarily calculated on the full invoice amount.

Qualifying VAT, certain material costs and other excluded amounts are removed from the calculation according to HMRC's rules.

For example, consider a registered subcontractor issuing an invoice containing £10,000 of labour charges subject to the standard 20% CIS deduction.

Assuming no other relevant amounts, £2,000 would be deducted and accounted for under CIS.

The subcontractor would receive £8,000 relating to those labour charges.

The £2,000 deduction represents a tax credit, not an additional fee imposed by the contractor.

Whether the subcontractor ultimately receives a refund depends on its actual tax position.

The official HMRC Construction Industry Scheme guidance explains how the deductions operate.

Why CIS Deductions Create Cash Flow Problems

CIS deductions can reduce the cash a subcontractor receives from completed construction work.

However, many operating expenses remain payable in full.

For example, a subcontracting company may invoice £40,000 of eligible labour during a month.

If the entire amount is subject to a 20% CIS deduction, the company receives £32,000 instead of £40,000.

The remaining £8,000 is accounted for through the CIS system.

The business may still need to pay:

Employees and other labour costs.
Subcontractors and suppliers.
Equipment finance instalments.
Fuel, transport and vehicle expenses.
Business insurance.
Premises and administrative costs.
Applicable taxes.
Existing business loan repayments.

For businesses operating on relatively narrow margins, the timing difference can be substantial.

A company may report profitable work while having insufficient cash to meet all its immediate commitments.

This problem can become more significant when several contractors make deductions throughout the year.

Why Strong Turnover Does Not Eliminate the Problem

A construction company may generate £1 million in annual revenue but have limited surplus cash after wages, materials, plant hire and other costs.

Revenue alone does not establish how much money is available for loan repayments.

A lender assessing funding while a CIS refund is pending will typically need to understand the company's actual cash flow, not simply its annual turnover or expected refund.

How Do CIS Tax Refunds Work for Limited Companies?

The CIS refund process for limited companies differs from that used by sole traders and partnerships.

This distinction is important because it affects when a repayment may become available and how much money the business can receive.

Step 1: Contractors Deduct CIS From Payments

When a limited company acts as a subcontractor, qualifying contractors may deduct CIS from its payments.

The company should receive payment and deduction statements supporting those amounts.

Step 2: The Company Reports Its CIS Deductions

Limited companies generally report their CIS deductions through their PAYE payroll reporting system.

HMRC instructs companies to submit the relevant Full Payment Submissions (FPS) and Employer Payment Summaries (EPS).

The EPS includes the CIS deductions suffered.

Step 3: CIS Deductions Reduce Qualifying PAYE Liabilities

The limited company can use its CIS deductions against relevant PAYE-related obligations, including applicable income tax, National Insurance and other qualifying amounts.

If deductions exceed those obligations, the excess can generally be carried forward for use against qualifying payments later in the same tax year.

This may reduce the amount the company otherwise needs to pay HMRC during the year.

Step 4: The Tax Year Ends

The UK tax year runs from 6 April to 5 April.

If the company still has unused CIS deductions after the year ends, it may be eligible to claim a repayment.

The company needs to have submitted the relevant payroll and tax reporting information.

Step 5: HMRC Reviews the Claim

HMRC may check whether the amounts claimed match the information reported by contractors.

It may also review outstanding tax liabilities.

According to HMRC's guidance updated on 25 August 2026, excess CIS deductions are applied to overdue PAYE or Corporation Tax balances before any remaining amount is paid or otherwise allocated.

The company may also be able to request that eligible amounts are used towards VAT or upcoming Corporation Tax liabilities.

Step 6: Any Remaining Refund Is Paid

If the claim is valid and an amount remains after the relevant adjustments, HMRC may repay the balance.

The official process is explained in Claim a Refund of CIS Deductions as a Limited Company.

Important: A company cannot generally request a cash refund of current-year excess CIS deductions before the tax year ends merely because it needs working capital.

HMRC identifies limited exceptions, including where the business has stopped trading or deductions were taken after a change to gross payment status.

How Do Sole Traders Claim a CIS Tax Refund?

Sole traders generally claim CIS deductions through Self Assessment rather than the limited-company PAYE offset process.

At the end of the tax year, the subcontractor submits the relevant tax return.

The return records gross trading income and the CIS deductions already suffered.

HMRC calculates the tax due and applies the allowable deductions.

If the deductions and other relevant credits exceed the final liability, a repayment may arise.

Example: Sole Trader CIS Refund

Suppose a self-employed construction subcontractor has £18,000 in CIS deductions recorded for the tax year.

Following completion of the relevant tax calculation, assume the total liability against which those deductions are credited is £13,000.

The potential repayment would be:

£18,000 − £13,000 = £5,000

This assumes there are no other adjustments or tax liabilities affecting the repayment.

The full £18,000 is not automatically refundable.

The contractor may receive £5,000 because that is the excess over the assumed final liability.

HMRC may also apply a repayment against other relevant tax amounts, including certain amounts becoming due.

The government's Self Assessment tax refund guidance explains these considerations.

What About Partnerships?

Partners generally report relevant CIS income and deductions through the applicable partnership and individual tax reporting arrangements.

The treatment differs from a limited company's corporate repayment process.

Partnerships should have their accountant confirm which amounts belong to the partnership and which are reflected in individual partners' tax calculations.

How Long Does a CIS Tax Refund Take in 2026?

There is no guaranteed payment date for every CIS refund.

The timeframe depends on the type of taxpayer, the accuracy of the claim, the relevant tax year and whether HMRC needs additional verification.

Limited Company CIS Refunds

HMRC's guidance updated on 25 August 2026 states that it will usually respond to a limited-company CIS repayment claim within eight weeks.

However, this is an expected response timeframe, not a guarantee that money will reach the company's bank account within eight weeks.

A claim may require further checks, additional documentation or correction before payment.

Sole Trader CIS Refunds

For sole traders, the timing depends on the Self Assessment process and relevant HMRC checks.

An online account may show a repayment as pending.

A pending status means the repayment has been created but still requires approval and payment.

The exact time to completion can vary.

Can You Claim a 2025–26 CIS Refund Now?

As of 25 October 2026, the 2025–26 tax year has ended.

Eligible limited companies can submit claims for excess deductions from that year, provided the applicable reporting and other requirements are satisfied.

Eligible sole traders can also address deductions for that tax year through the relevant Self Assessment process.

What About the 2026–27 Tax Year?

The 2026–27 tax year does not end until 5 April 2027.

A limited company generally cannot claim an ordinary end-of-year cash repayment for that tax year before it ends, except in the circumstances HMRC permits.

It may, however, continue using qualifying CIS deductions against relevant PAYE liabilities during the year.

How Can You Check a Delayed Refund?

HMRC provides a service for checking expected response times for CIS enquiries and repayment requests.

The service is updated periodically.

See Check When You Can Expect a Reply From HMRC.

A contractor should not select a loan maturity date solely on the assumption that HMRC will process the repayment within a particular number of weeks.

Why Is My CIS Tax Refund Delayed?

A CIS refund may be delayed for several reasons.

Understanding the cause can help a construction business determine whether commercial borrowing is necessary and whether the expected repayment amount is reliable.

Missing Payment and Deduction Statements

A subcontractor may be unable to provide records supporting the amounts deducted.

HMRC may require further evidence before accepting the figures.

Contractor Reporting Does Not Match

The contractor's CIS return may contain different figures from the subcontractor's records.

HMRC may need to investigate the discrepancy.

Incomplete Payroll Reporting

For a limited company, missing or incorrect FPS or EPS submissions can affect the repayment process.

Outstanding Company Tax Returns

HMRC requires the relevant Company Tax returns and other applicable submissions to be completed before a limited-company CIS repayment claim can be processed.

Existing Tax Debts

If the company owes overdue PAYE or Corporation Tax, HMRC may use excess CIS deductions to settle those obligations.

The amount ultimately received in cash may therefore be smaller than expected.

Verification Checks

HMRC may need to confirm the authenticity of the claim or its supporting information.

This can involve requesting bank statements, deduction statements or other evidence.

Incorrect Company or Payment Information

Incorrect tax references, company information or bank details can create administrative problems.

Changes to the Claim

If a previously submitted claim requires correction, HMRC may need to review the amended information.

Suspected Incorrect Deductions

Where a contractor's statements contain errors or the deductions were not reported properly, the subcontractor may need to resolve the issue before the claim can be finalised.

A delayed refund is not the same as an approved refund awaiting bank transfer.

Lenders may treat those two situations differently.

Can You Borrow Against an Expected CIS Tax Refund?

Potentially, but this requires careful explanation.

A CIS refund is a tax repayment calculated under HMRC rules.

It is not automatically equivalent to an accepted commercial invoice or freely assignable trade receivable.

Some lenders may consider a documented expected refund as supporting evidence for a short-term business loan.

However, that does not mean the lender is directly financing or purchasing the tax refund itself.

Three Different Funding Situations

1. A refund is estimated but not yet claimed

The business believes it has excess CIS deductions but has not completed the relevant claim.

The amount and timing remain uncertain.

2. A refund claim has been submitted

The contractor has filed the relevant information and is awaiting HMRC's response.

The lender may consider the submitted claim, but approval and the final amount remain subject to HMRC's review.

3. HMRC has confirmed a repayment

The contractor has received confirmation of the repayment amount or its processing status.

This may provide stronger evidence, although the lender still needs to assess when the money will arrive and whether any other obligations affect the payment.

A lender may consider these circumstances as part of underwriting.

However, no financing provider should be assumed to offer funding secured solely against a CIS refund unless its actual product and legal documentation explicitly support that arrangement.

A company should not describe an estimated tax refund as an unconditional, government-guaranteed source of repayment.

Business Funding Options While Waiting for a CIS Refund

Different financing structures can help eligible construction businesses manage short-term cash requirements.

The appropriate option depends on the business's cash flow, available assets, outstanding invoices and repayment strategy.

1. Short-Term Business Loans

A short-term business loan provides an agreed amount of capital with contractual repayment obligations.

A construction subcontractor might use the proceeds to cover wages, supplier invoices, equipment repairs or another eligible operating requirement.

Some lenders offer shorter repayment periods, while others may provide longer terms.

The lender will generally assess the borrower's trading history, bank statements, creditworthiness and ability to repay.

An expected CIS refund may form part of the financial information supporting the application.

However, the loan remains repayable according to its contract even if HMRC delays the refund.

Most relevant when: The business has a temporary, identifiable funding need and a credible repayment source independent of an uncertain refund date.

2. Unsecured Working Capital Loans

An unsecured business loan does not require the borrower to pledge a specific asset as the primary collateral.

Some lenders assess eligibility using business turnover, cash flow and credit history.

However, unsecured commercial loans may still require personal guarantees from directors.

For example, an established construction company may need £20,000 to cover payroll while waiting for customers and HMRC to settle outstanding amounts.

An unsecured loan could be considered if the company's financial position supports the required repayments.

The company should not assume that the refund amount determines its borrowing limit.

3. Revolving Business Lines of Credit

A revolving credit facility can provide access to capital within an approved limit.

The borrower may draw funds as needed and repay the outstanding amount according to the agreement.

Depending on the product, repaid funds may become available for future borrowing.

This can be useful for construction businesses with recurring working capital requirements.

For example, a subcontractor may draw money to cover labour expenses and reduce the balance after receiving customer payments.

A revolving facility may avoid borrowing the full amount upfront when only part of the funding is needed immediately.

However, the lender may charge interest, commitment fees, administration fees or other expenses.

Renewal and repayment-on-demand provisions should also be reviewed.

4. Invoice Finance for Construction Subcontractors

Invoice finance may be relevant where the business has eligible unpaid invoices owed by commercial customers.

The finance provider advances a portion of the qualifying receivable before the customer pays.

The British Business Bank explains that initial advances commonly reach approximately 80% to 90% of eligible invoice value, subject to provider criteria.

However, the financing availability depends on the actual amount that is owed and collectible.

Important: CIS Deductions and Invoice Finance

Construction invoices require additional attention because CIS deductions can affect net cash receipts.

A subcontractor may issue an invoice with a headline value higher than the amount the contractor will pay after applicable CIS deductions.

An invoice finance provider may calculate eligible availability differently from the invoice's gross face value.

The provider may also account for retentions, disputed work, uncertified applications for payment and other contractual deductions.

For example, a £30,000 construction invoice does not automatically support an advance calculated on the full £30,000.

The lender must determine the value of the eligible receivable and how CIS deductions affect collection.

Invoice finance against an unpaid customer invoice is not the same thing as financing an expected HMRC tax refund.

The former generally relies on a commercial debtor's payment obligation.

The latter involves a tax repayment governed by HMRC's rules.

5. Asset-Backed Business Lending

Some established subcontractors own valuable equipment, vehicles or other eligible assets.

A lender may consider financing secured against those assets.

Examples could include qualifying excavators, loaders, commercial vehicles and construction machinery.

Asset-backed lending may be relevant where the business has limited cash flow but a substantial base of eligible assets.

However, collateral does not guarantee approval.

The lender still evaluates the business, ownership rights, asset value and repayment strategy.

6. Equipment Refinancing

A construction company that owns eligible equipment outright may be able to investigate refinancing.

For example, a contractor waiting for a CIS refund may own machinery with an established resale market.

A specialist lender might consider advancing funds against that machinery, subject to valuation and underwriting.

However, refinancing creates a new loan obligation and places the equipment at risk if repayments are not made.

A contractor should assess whether releasing equity from essential equipment is appropriate for a temporary funding gap.

7. Supplier Credit and Negotiated Payment Terms

Commercial borrowing is not always necessary.

A subcontractor may be able to negotiate appropriate payment arrangements with materials suppliers or other business creditors.

Where commercially feasible, extending supplier terms may reduce the amount of cash needed before the refund arrives.

However, suppliers are not obliged to provide additional credit.

Any revised terms should be documented and affordable.

8. Customer Payment Arrangements

A contractor may be able to negotiate shorter billing periods, accepted milestone payments or faster settlement of outstanding commercial invoices.

This can sometimes reduce the funding gap more directly than taking on a new loan.

However, any payment changes depend on the contract and customer agreement.

Example: A Construction Company Awaiting an £18,000 CIS Refund

Consider a hypothetical UK limited company specialising in groundworks and construction subcontracting.

The company has completed its 2025–26 tax reporting and is awaiting an HMRC CIS repayment.

Step 1: Calculate the CIS Deductions

Assume contractors deducted a total of £58,000 from the company's qualifying payments during the tax year.

The company has correctly used £34,000 of those deductions against eligible PAYE-related liabilities through the appropriate reporting process.

The remaining amount is:

£58,000 − £34,000 = £24,000

The business therefore calculates £24,000 in excess deductions before considering other relevant tax balances.

Step 2: Account for Outstanding Tax

Suppose the company has £6,000 in overdue Corporation Tax that HMRC applies against the eligible excess.

The potential cash repayment becomes:

£24,000 − £6,000 = £18,000

This assumes all CIS figures are validated and no other adjustments apply.

The company expects an £18,000 refund but has not yet received the money.

Step 3: Identify the Working Capital Requirement

The company needs £15,000 to cover wages, materials and other necessary costs associated with ongoing construction work.

It expects to collect commercial customer invoices, but those payments may not arrive before the expenses fall due.

The company considers short-term funding.

Step 4: Calculate a Hypothetical Loan Cost

Assume the company is offered the following illustrative financing arrangement:

Loan principal: £15,000.
Annual nominal interest rate: 14%.
Interest calculation: Simple daily interest on the full outstanding principal.
Loan period: 90 days.
Arrangement fee: 2% of principal.
Principal and interest due at maturity.

The interest calculation is:

£15,000 × 14% × 90 ÷ 365 = approximately £517.81

The arrangement fee would be:

£15,000 × 2% = £300

Total financing charges would therefore be:

£517.81 + £300 = £817.81

If the arrangement fee were deducted from the initial advance, the business would receive £14,700 rather than the full £15,000.

At maturity, it would still owe £15,517.81 in principal and interest.

The total financing cost would remain £817.81 under the stated assumptions.

These figures are hypothetical and do not represent an actual lender quotation.

Step 5: Consider the Expected Refund

If HMRC pays the £18,000 refund before the loan maturity date, the company could potentially use part of that money to repay the loan.

After paying £15,517.81, approximately £2,482.19 of the refund would remain.

However, this assumes the full £18,000 arrives and is available for that purpose.

Step 6: Consider a Delayed Refund

What happens if HMRC has not paid by day 90?

The lender's repayment may still be due.

The company would need sufficient money from trading receipts, cash reserves or another permitted source to meet the obligation.

A lender is not required to extend the loan simply because HMRC has delayed the refund.

An extension could involve additional interest, fees or underwriting.

What This Example Demonstrates

A CIS repayment can be a relevant part of a construction company's short-term financial planning.

However, borrowing against an expected future receipt creates a risk if that receipt is delayed, reduced or offset against another obligation.

A suitable financing arrangement should remain affordable even if the refund does not arrive on the expected date.

The example is illustrative and does not describe an actual borrower, HMRC claim or available financing product.

How Much Could a Construction Subcontractor Borrow?

There is no universal amount available to businesses awaiting CIS refunds.

An expected £25,000 refund does not automatically qualify a company for a £25,000 business loan.

The lender may assess several different factors.

Trading History

An established subcontractor with several years of trading records may have more financing options than a newly registered business.

However, individual lenders apply different criteria.

Annual Turnover

Revenue can help establish the scale of the business.

However, lenders also need to understand operating costs and cash available for repayments.

Bank Statements

Lenders may review deposits, wages, materials payments, overdraft usage and existing financing commitments.

Consistent incoming customer payments may support an application.

Profitability

A company generating strong turnover but operating with narrow or negative margins may have limited capacity for additional debt.

Outstanding Invoices

Eligible commercial invoices may support certain working capital facilities.

However, unpaid construction invoices can be affected by retentions, disputes and CIS deductions.

Available Assets

Qualifying machinery, vehicles or other assets may support secured funding.

Ownership and existing security interests must be verified.

Refund Documentation

A lender may consider the company's tax calculation, CIS deduction statements and evidence of a submitted refund claim.

However, the final HMRC repayment amount and timing may remain uncertain.

Credit History

Missed payments, defaults and other adverse information may affect eligibility, pricing and security requirements.

Existing Debt

Equipment loans, overdrafts and other repayment obligations reduce the cash available for additional borrowing.

Borrowing capacity is determined by the company's overall financial position and the lender's criteria, not the CIS refund estimate alone.

What Documents May Lenders Request?

A construction company applying for funding while awaiting a CIS repayment may need to provide both normal commercial borrowing information and evidence relating to the expected tax credit.

Requirements vary by lender.

Business Financial Information

Common documents may include recent business bank statements, annual financial statements, current management accounts and cash flow forecasts.

The lender may also request a schedule of existing loans, hire purchase agreements and other financing commitments.

CIS Payment and Deduction Statements

These statements help establish the amounts deducted by customers under CIS.

The business should retain complete records and reconcile them with its accounting information.

PAYE and EPS Records

For limited companies, evidence of relevant payroll submissions and CIS offsets may help explain the remaining credit.

HMRC Repayment Claim Information

Where a claim has been submitted, the lender may request evidence of its status or submission.

However, an acknowledgement does not guarantee the amount or payment date.

Tax Liability Information

The lender may need to understand whether outstanding tax liabilities could reduce the anticipated refund.

Current Construction Contracts

Signed contracts and current projects can support the lender's assessment of ongoing trading activity.

Customer Debtor Reports

An aged debtor report may help establish what commercial customers owe the business.

This can be particularly relevant if invoice finance is being considered.

Equipment Information

For asset-backed funding, lenders may request ownership evidence, machinery details, valuations and existing settlement statements.

Forecast Cash Flow

A forecast should explain how the company expects to meet repayments from operating cash, customer receipts or other available sources.

Sensitive tax and financial records should only be submitted through an appropriate secure process.

Can You Get Funding if HMRC Has Not Confirmed the Refund?

Potentially.

Some commercial lenders may evaluate a business application based on normal trading performance even where the CIS repayment is still under review.

However, the expected refund should be clearly identified as unconfirmed.

The lender may place little or no weight on an amount that has not been properly reconciled or claimed.

For example, a contractor with consistent customer payments and sufficient operating cash may qualify for a working capital loan regardless of the CIS repayment status.

By contrast, a business whose only possible repayment source is an unverified tax refund may face significant difficulty obtaining suitable financing.

The distinction is important:

A lender can assess the business's ability to borrow while a refund is pending without treating the refund itself as confirmed collateral.

Can a Sole Trader Get Funding While Waiting for a CIS Refund?

Potentially.

Some UK finance providers accept applications from eligible sole traders.

However, other commercial lenders restrict their products to limited companies or other business structures.

A sole trader may need to provide personal financial information because there is no separate limited-company borrower.

The lender may examine trading income, expenses, outstanding liabilities, credit history and repayment affordability.

The expected CIS refund may also be considered, but it does not guarantee approval.

Is the Refund Automatically Available for Business Repayments?

No.

A sole trader's tax refund forms part of the individual's wider financial position.

The trader should consider personal tax obligations, necessary living expenses and business cash requirements before relying on the full amount for loan repayment.

What About Bad Credit?

Some providers may consider applicants with adverse credit histories.

However, financing availability may be restricted, and additional borrowing may be inappropriate if the trader cannot support the repayments.

An expected CIS refund does not automatically overcome poor affordability.

Can a Construction Company Get Funding Without a Personal Guarantee?

Potentially.

Some commercial finance providers offer qualifying facilities without a director's personal guarantee.

Others require guarantees as part of their normal credit assessment.

An unsecured business loan does not automatically mean that no guarantee is required.

A personal guarantee can create liability for the individual if the borrowing business defaults.

Directors should review the scope, limits and enforcement conditions before signing.

Businesses should also consider any security over equipment, receivables or other company assets.

What Happens if HMRC Reduces Your Expected CIS Refund?

This is one of the main risks when borrowing on the assumption that a tax repayment will fund settlement.

HMRC may identify differences between the claim and the contractor's reported CIS deductions.

It may also apply eligible amounts against outstanding tax liabilities.

For example, a company might expect a £25,000 cash repayment.

After further reconciliation, HMRC may determine that only £15,000 is payable.

The business would have £10,000 less cash than originally forecast.

If it had already borrowed £20,000 expecting the entire loan to be repaid from the refund, a shortfall could arise.

How to Manage This Risk

Before borrowing, work with an accountant to establish a realistic repayment estimate.

Reconcile deduction statements, payroll offsets and relevant tax obligations.

Distinguish the expected amount from any sum HMRC has formally confirmed.

The business should also identify another credible source of repayment if the actual refund is lower than expected.

What if HMRC Has Not Received Your CIS Deduction Information?

HMRC may find that a subcontractor's claimed deductions do not match the contractor's submissions.

This can create difficulties when processing a repayment.

The subcontractor should check its payment and deduction statements and contact the relevant contractor about any discrepancies.

Under HMRC's rules, contractors must generally provide payment and deduction statements within 14 days of the end of the relevant tax month.

If statements are missing, the subcontractor should ask for replacements.

Where these cannot be obtained, HMRC provides a process for supplying supporting details.

Relevant information can include the contractor's identity, payment dates, gross amounts and deductions.

See HMRC's guidance on getting paid under CIS.

Watch for Incorrect or Fraudulent Deductions

HMRC published additional guidance on 25 August 2026 warning that some construction workers receive deduction statements showing amounts that were not properly reported or paid to HMRC.

Such issues can affect tax repayment claims.

Contractors should maintain their own records and investigate significant discrepancies promptly.

Do not rely on an expected refund that cannot be supported by genuine payment and deduction records.

How to Reduce CIS Cash Flow Problems Without Taking a Loan

Borrowing may be appropriate in certain circumstances, but it is not always the lowest-cost solution.

1. Make Sure Limited-Company CIS Offsets Are Being Used Correctly

A limited company should ensure its payroll reporting accurately reflects the CIS deductions it has suffered.

Correct use of available offsets can reduce qualifying PAYE payments during the tax year.

This may preserve working capital without requiring a new loan.

An accountant or payroll specialist can help verify the treatment.

2. Submit the Refund Claim Correctly

Where a repayment is due after the tax year, ensure that the relevant submissions have been completed.

For limited companies, this includes applicable FPS, EPS, CIS contractor returns and Company Tax returns.

Incomplete reporting can delay HMRC's assessment.

3. Reconcile Deduction Statements Throughout the Year

Do not wait until the end of the tax year to identify missing or incorrect records.

Maintain a monthly record of CIS deductions by contractor and payment period.

This can help identify discrepancies early.

4. Review Supplier Payment Terms

A business may be able to negotiate payment terms that better match incoming customer receipts.

Any extension should be agreed with the supplier.

5. Improve Customer Collections

Collect overdue commercial invoices where amounts are genuinely due.

Confirm that timesheets, applications for payment and other documentation are submitted correctly.

6. Reduce Unnecessary Borrowing

If the business only needs £12,000 to cover a temporary funding gap, borrowing £25,000 may create unnecessary costs.

Calculate the amount actually required.

7. Consider an HMRC Payment Arrangement Where Appropriate

If the business is struggling with a separate tax liability, it may be eligible to discuss a Time to Pay arrangement with HMRC.

An agreement can allow qualifying tax debt to be paid in instalments.

However, it is not automatically available, and HMRC assesses affordability and the company's circumstances.

Where a company has a pending CIS claim intended to settle an HMRC debt, HMRC's guidance also says it may be able to pause relevant collection activity in some circumstances.

These arrangements should be discussed directly with HMRC.

See HMRC's guidance on paying tax in instalments.

Can Gross Payment Status Prevent Future CIS Cash Flow Problems?

For eligible subcontractors, gross payment status can reduce the working capital impact of CIS deductions.

A subcontractor with gross payment status receives qualifying construction payments without the standard CIS deduction.

The business remains responsible for meeting its applicable tax obligations.

Who Can Apply for Gross Payment Status?

HMRC applies qualifying tests relating to construction activity, tax compliance, business operation and turnover.

The published turnover requirements include:

£30,000 for a sole trader.
£30,000 per partner or at least £100,000 for the partnership, subject to the relevant rules.
£30,000 per director or at least £100,000 for a company, subject to the relevant rules.

Special rules can apply, including for closely controlled companies and certain turnover-test circumstances.

The figures exclude VAT and qualifying materials costs.

Eligibility is not determined by turnover alone.

Does Gross Payment Status Guarantee More Profit?

No.

It changes the timing of CIS deductions.

The subcontractor may receive more cash from qualifying customer payments, but it must still meet its tax liabilities.

A business should plan for those future tax obligations rather than treating the additional receipts as permanent surplus cash.

Can Gross Payment Status Be Removed?

Yes.

HMRC can review and withdraw gross payment status where relevant conditions are no longer met.

Changes introduced from 6 April 2026 also strengthened HMRC's powers relating to specified CIS fraud and serious non-compliance.

More information is available in HMRC's gross payment status guidance.

How VAT Can Affect Construction Business Cash Flow

Some construction subcontractors are affected by the domestic VAT reverse-charge rules.

Where the relevant conditions are satisfied, the customer rather than the supplier accounts for VAT on qualifying construction services.

This means the subcontractor may no longer receive the VAT amount as part of the customer payment in the normal way.

The reverse charge is separate from CIS tax deductions, but both can affect the timing and amount of cash received.

A contractor should therefore distinguish:

CIS deductions.
VAT amounts.
Net customer payments.
Tax liabilities.
Expected CIS repayments.

These should not be combined into one figure without appropriate reconciliation.

The HMRC construction VAT reverse-charge guidance explains the relevant conditions and exclusions.

Which Construction Businesses May Need Funding While Waiting for CIS Refunds?

The issue can affect many types of subcontracting business.

Groundworks and Civil Engineering Subcontractors

These businesses may pay labour, fuel, plant hire and other site expenses before customer payment.

Substantial CIS deductions can increase working capital pressure.

Electrical Contractors

Electrical subcontractors may face costs relating to electricians, materials, access equipment and project mobilisation.

A company awaiting a CIS repayment may require temporary funding for ongoing contracts.

Plumbing and Mechanical Contractors

These businesses may purchase substantial quantities of materials and specialist equipment before collecting completed project invoices.

Roofing Contractors

Roofing subcontractors can incur significant materials, labour and access-related expenditure.

Seasonal conditions and payment delays can further affect cash flow.

Drylining and Interior Fit-Out Contractors

Fit-out businesses may operate with large labour commitments, stage payments and project retentions.

A pending CIS repayment may be only one part of a wider cash flow requirement.

Scaffolding Businesses

Scaffolding contractors may have significant labour, transport and equipment costs.

The relevant CIS treatment depends on the services supplied and contractual arrangements.

Landscaping and Construction-Related Groundworks

Some landscaping operations carried out as part of qualifying construction work fall within CIS.

Routine garden maintenance and other excluded activities are treated differently.

Operated Plant Hire Businesses

Plant hire supplied with an operator for qualifying construction operations can fall within CIS.

Equipment-only hire generally falls outside the scheme.

The precise payment treatment should be checked against HMRC's rules.

How to Apply for Business Funding While Waiting for a CIS Refund

A construction business should prepare its financing application carefully, particularly where the anticipated tax repayment is relevant to the borrowing strategy.

Step 1: Establish the Actual CIS Repayment Position

Calculate total CIS deductions and the amounts already used against qualifying tax liabilities.

Work with an accountant where necessary.

Do not assume all deductions are refundable.

Step 2: Confirm the Claim Status

Determine whether the relevant tax year has ended and whether the claim has been submitted.

Identify any outstanding returns, evidence requests or discrepancies.

Step 3: Calculate the Immediate Funding Requirement

Prepare a forecast showing wages, supplier payments, operating costs, existing debt and expected customer receipts.

Borrow only the amount required for the financing purpose.

Step 4: Identify Repayment Sources

Consider whether the loan can be repaid from normal trading, customer collections, available reserves or a verified future receipt.

Do not rely exclusively on an uncertain refund date.

Step 5: Review Existing Financial Commitments

List current loans, overdrafts, equipment finance and other material debt obligations.

The new funding must remain affordable alongside these commitments.

Step 6: Compare Financing Structures

Determine whether a conventional loan, revolving facility, invoice finance arrangement or appropriate asset-backed product better matches the requirement.

Step 7: Prepare Supporting Documents

Gather financial statements, bank records, debt information and relevant CIS documents.

Provide accurate details of the anticipated refund and its status.

Step 8: Review the Cost of Borrowing

Check interest or financing charges, arrangement fees, repayment dates, guarantees and any early-settlement or extension costs.

Step 9: Stress-Test a Delayed Refund

Calculate how the company would meet repayments if HMRC paid one, two or three months later than anticipated.

This is especially important where the proposed facility has a large final payment.

Step 10: Complete the Lender's Assessment

If the financing application is approved, the provider may require additional verification, security documentation or other conditions.

No loan amount, approval or funding date is guaranteed.

When Should You Avoid Borrowing Against an Expected CIS Refund?

Additional financing may be unsuitable where the company cannot demonstrate a credible repayment strategy.

Warning signs include:

The refund has not been properly calculated.
HMRC has disputed material parts of the claim.
Relevant tax returns remain incomplete.
The company has substantial outstanding tax debts that may absorb the refund.
The lender requires repayment before the refund is reasonably expected.
The business has no alternative source of repayment.
Existing loans already consume most available cash.
The company is borrowing repeatedly to cover normal operating losses.
The total financing cost is excessive relative to the benefit of receiving cash earlier.

A company that cannot meet essential obligations may need professional accounting, restructuring or insolvency advice rather than another loan.

The purpose of short-term funding should be to address a manageable timing gap, not postpone an underlying financial problem.

Frequently Asked Questions About Business Funding While Waiting for a CIS Refund

Can I Get a Business Loan While Waiting for a CIS Tax Refund?

Potentially.

Some commercial lenders may consider eligible construction businesses awaiting tax repayments.

Approval depends on the business's financial circumstances, borrowing requirements and lender criteria.

Can I Borrow Directly Against My CIS Tax Refund?

Some providers may consider a documented expected refund when assessing a short-term financing request.

However, a CIS refund is not automatically acceptable collateral, and there is no universal guaranteed refund-advance product.

Does HMRC Offer a CIS Refund Advance Loan?

HMRC administers CIS deductions and tax repayments.

Its official repayment guidance does not establish a general HMRC loan product that advances money against pending CIS refunds.

Commercial borrowing is a separate arrangement with an independent finance provider.

How Long Does a CIS Refund Take in 2026?

HMRC says it usually responds to limited-company CIS repayment claims within eight weeks.

However, this is not a guaranteed payment date.

Sole trader Self Assessment repayments and claims requiring further checks can follow different timelines.

Can I Claim a CIS Refund Before the Tax Year Ends?

Limited companies can generally claim excess deductions after the tax year ends.

HMRC permits certain exceptions, including where the business has stopped trading or deductions occurred after changing to gross payment status.

Sole traders who stop trading may also have a route to an in-year claim.

Can I Get Funding if My CIS Refund Is Still Pending?

Potentially.

Lenders may assess the business's cash flow, creditworthiness and other repayment sources even where the refund has not yet been confirmed.

Can a Sole Trader Get a CIS Refund Loan?

Some finance providers accept eligible sole traders.

However, financing availability depends on the lender, personal and business circumstances, and the actual repayment strategy.

Can a Limited Company Use CIS Deductions Against PAYE?

Yes.

Limited companies can use correctly reported CIS deductions against qualifying PAYE-related liabilities through the relevant payroll reporting process.

Can I Use CIS Deductions Directly Against Corporation Tax During the Year?

Limited companies should follow HMRC's prescribed PAYE offset process during the tax year.

They should not simply enter CIS deductions on a Corporation Tax return as a substitute for that process.

At the end of the year, excess deductions may be considered for repayment or relevant tax offsets under HMRC's rules.

Can HMRC Use My Refund to Pay Other Tax Debts?

Yes.

For limited-company CIS repayment claims, HMRC may use eligible excess deductions against overdue PAYE or Corporation Tax before releasing any remaining refund.

Can a CIS Refund Be Less Than Expected?

Yes.

The final repayment can be affected by tax liabilities, incorrect figures, reporting discrepancies and other adjustments.

What Documents Prove My CIS Deductions?

Contractor payment and deduction statements are important supporting evidence.

Relevant payroll records, bank statements and tax information may also be required.

What if My Contractor Has Not Provided CIS Statements?

Ask the contractor for replacement statements.

If they cannot be obtained, HMRC provides guidance on submitting alternative supporting information.

Can I Get Business Funding With Bad Credit?

Potentially.

Some alternative lenders consider adverse credit histories, but eligibility, financing amounts and costs may be affected.

A pending tax refund does not guarantee approval.

Can I Get Funding Without Property Security?

Some commercial lenders offer unsecured financing.

Other providers may require assets or personal guarantees.

The requirements depend on the product and borrower.

Is Invoice Finance the Same as a CIS Refund Loan?

No.

Invoice finance generally relies on eligible unpaid commercial customer invoices.

A CIS refund is a tax repayment governed by HMRC's rules.

They are different financial assets and should not be treated as interchangeable.

Can I Use Invoice Factoring if CIS Has Been Deducted?

Potentially.

A factoring provider may consider eligible construction invoices, but CIS deductions, retentions and other adjustments can affect the amount available.

Can I Borrow Against Construction Equipment While Waiting for HMRC?

Potentially.

Qualifying owned machinery or other assets may support specialist commercial financing.

Approval depends on asset value, ownership, existing security and borrower affordability.

What Happens if HMRC Pays After My Loan Is Due?

The lender's contractual repayment obligations generally remain in place.

An extension may be possible only if the lender agrees.

Additional interest or fees may apply.

Can I Repay the Loan Early When My Refund Arrives?

Some agreements allow early repayment.

However, early-settlement charges or minimum financing fees may apply.

The borrower should confirm the terms before signing.

Does Gross Payment Status Stop CIS Deductions?

Gross payment status generally allows qualifying subcontractors to receive payments without CIS deductions.

However, the business remains responsible for its tax obligations and must continue satisfying HMRC's requirements.

Can I Get a £10,000 Business Loan While Waiting for a CIS Refund?

Potentially.

Some commercial lenders offer facilities of that size.

Eligibility depends on the provider, business structure, affordability and other criteria.

Can I Get Funding for Payroll and Materials?

Some working capital loans and other commercial finance products can be used for legitimate operating expenses.

The lender will assess the purpose and the company's ability to repay.

What if My CIS Refund Is Being Investigated?

A claim requiring additional HMRC checks may be less certain in amount and timing.

The business should resolve the outstanding questions and avoid relying on the refund as a guaranteed repayment source.

Is a CIS Tax Refund Taxable Business Income?

CIS deductions are advance tax payments, and the repayment of an excess deduction is not generally new trading revenue simply because the cash is received.

However, the correct accounting and tax treatment depends on the legal entity and relevant transactions.

An accountant should confirm how the refund is recorded.

What Is the Best Business Funding Option While Waiting for a CIS Refund?

There is no universal best option.

A short-term loan may suit a defined funding requirement.

A revolving facility may be appropriate for recurring working capital needs.

Invoice finance may help where the business has eligible unpaid customer invoices.

Asset refinancing may be relevant where qualifying equipment is available.

The correct choice depends on borrowing costs, repayment affordability and the reliability of the expected cash receipts.

Explore Business Funding While Waiting for a CIS Tax Refund

If your construction business is awaiting a CIS tax repayment and needs working capital to cover wages, materials, equipment or other eligible expenses, the first step is understanding the amount required and how the financing will be repaid.

Mehmi Financial Group is an independent, Canada-based commercial financing brokerage that accepts enquiries from eligible businesses in the United Kingdom, subject to applicable local requirements and confirmed third-party financing provider availability.

Our team can review the basic circumstances of a commercial financing enquiry and discuss whether an appropriate financing or referral pathway may be available.

Discuss Your Construction Business Funding Options

When contacting the team, explain:

Your business's UK location.
Whether you operate as a limited company, sole trader or partnership.
How long the business has been trading.
Approximate annual turnover.
The amount of financing required.
The intended use of funds.
The estimated CIS repayment amount.
Whether the refund claim has been submitted.
Any expected HMRC tax offsets.
Current material business loan or equipment finance obligations.
Whether the company has unpaid commercial invoices or eligible business assets.

Begin with general business information.

Do not send detailed HMRC correspondence, tax references, bank statements, identity documents or other sensitive records through an unsecured initial enquiry.

If further documentation is needed, request an appropriate secure submission process.

Mehmi Financial Group is not HMRC, a tax adviser or a direct lender. It cannot approve, accelerate or guarantee an HMRC CIS repayment.

Any financing or referral pathway is subject to confirmed provider availability, applicable local requirements and independent underwriting.

Final Thoughts: Managing Cash Flow While Waiting for a CIS Refund

CIS deductions can create substantial working capital pressure for UK construction subcontractors.

A business may complete profitable work while having significant amounts accounted for through the tax system rather than immediately available for operating expenses.

However, a refund is only payable where the relevant tax calculations and HMRC rules support it.

Limited companies, sole traders and partnerships follow different reporting and repayment processes.

Before considering commercial borrowing, construction businesses should establish their actual CIS position, check for missing documentation and understand whether outstanding tax liabilities could reduce the expected payment.

Business loans, revolving credit, invoice finance and asset-backed facilities may help eligible contractors manage temporary funding gaps.

However, financing creates costs and repayment obligations.

The business should not rely entirely on HMRC paying a particular amount by a particular date.

The most suitable funding arrangement is one that supports the construction company's immediate working capital needs while remaining affordable even if its CIS tax refund is delayed or reduced.

About the Author

Jodhbir Mehmi — Mehmi Financial Group

Jodhbir Mehmi works in commercial finance, helping businesses assess financing needs, prepare financial information and evaluate potential commercial funding structures.

Mehmi Financial Group is an independent commercial financing brokerage facilitating eligible third-party financing enquiries in supported markets, subject to applicable local requirements and confirmed provider availability.

Authoritative Sources and Further Reading

Important Disclosure

This article provides general educational information and does not constitute personalised financial, tax, accounting or legal advice.

All business examples, tax refund calculations, borrowing amounts, interest rates, fees and repayment scenarios are hypothetical and do not represent actual borrower cases, HMRC repayment decisions or verified current financing offers.

Mehmi Group Corp., trading as Mehmi Financial Group, is an independent Canada-based commercial financing brokerage and intermediary, not a bank or direct lender.

Mehmi Financial Group is not affiliated with HMRC and does not process or accelerate CIS tax refunds.

UK financing enquiries are subject to applicable local legal and regulatory requirements and confirmed independent third-party provider availability.

Commercial financing providers establish their own eligibility, underwriting, pricing, security, guarantee and repayment requirements.

Mehmi Financial Group may receive commissions or referral fees from financing providers.

No financing approval, interest rate, loan amount, repayment term, HMRC refund amount or funding date is guaranteed.

Business and commercial purposes only.

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