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Deductible Expenses for CIS Subcontractors and Construction LTD Companies

Many subcontractors and construction businesses lose hundreds, sometimes thousands, of pounds every year because they do not claim all the expenses they are legally allowed to deduct.

In the construction industry, costs can add up quickly: tools, materials, equipment, travel, mobile phone, accounting fees, software, insurance, subcontractors, training, rent, utilities and more. If these costs are genuinely related to your business and properly documented, they may help reduce your tax bill or increase the amount you can recover from HMRC.

For a self-employed CIS subcontractor, allowable expenses reduce taxable profit. If CIS tax has already been deducted at source, this can often lead to a Tax Refund through the Self Assessment Tax Return.

For a Limited Company, deductible business expenses reduce the company’s taxable profit, which may reduce Corporation Tax. If a Limited Company has suffered CIS deductions from contractors, these are usually reclaimed through the correct company CIS/PAYE process, not simply as a normal personal tax refund.

The key point is simple: this is not about inventing expenses. It is about correctly claiming genuine business costs that are necessary, reasonable and supported by proper records.

What Is a Deductible Business Expense?

A deductible expense is a cost that can be deducted from your business income or profit before tax is calculated.

For self-employed subcontractors, deductible expenses reduce the profit used to calculate Income Tax and National Insurance.

For Limited Companies, deductible expenses reduce the company’s taxable profit and may reduce Corporation Tax.

The basic rule is:

If the cost is wholly for business, it may be deductible. If it is used partly for business and partly personally, only the business proportion should be claimed.

For example, if your mobile phone is used for both personal and business calls, you should only claim the business-use percentage.

1. Administrative and Professional Services

Many administrative and professional costs may be deductible if they are directly related to your business.

Examples include:

• Accounting fees

• Legal and professional fees

• Business registration fees

• Business licences and permits

• Professional liability insurance

• Memberships, dues and professional subscriptions

• Advertising and marketing

• Printing, postage and delivery

• Bank charges

• Business loan interest

These expenses may look small individually, but over a full tax year they can make a noticeable difference.

For a Limited Company, these costs should be recorded correctly in the company accounts. For self-employed subcontractors, they should be included in the Self Assessment records and supported with invoices, receipts or bank statements.

2. Technology, Office and Communications

Even in construction, many business tasks are now digital. You may need technology for invoicing, communication, record keeping, document storage, job management and accounting.

Potential deductible costs include:

• Computer hardware

• Software

• Web hosting or cloud services

• Internet costs

• Office equipment

• Office supplies

• Mobile phone costs

• Business apps

• Accounting software such as QuickBooks

If these items are used partly personally, you should only claim the business proportion.

For example, if your internet is used at home by the whole family but also used for business admin, you should not automatically claim 100%. You should calculate a fair and reasonable business-use percentage.

3. Materials, Tools and Equipment

For people working in construction, materials, tools and equipment are often some of the most important deductible costs.

Examples include:

• Construction materials

• Site consumables and accessories

• Tools, hand tools and machinery

• Leasing or hire of machinery and equipment

• Personal Protective Equipment, also known as PPE

• Steel-toe boots

• Hard hats, gloves, hi-vis clothing and safety glasses

• Repairs or replacements for tools used in work

There is an important difference between protective workwear and normal everyday clothing.

Protective clothing required for work, such as safety boots, helmets, gloves or hi-vis clothing, may be allowable. Normal clothing, such as jeans, t-shirts or ordinary jackets, is not automatically deductible just because you wear it while working.

The expense must be genuinely connected to the work and properly recorded.

4. Transport and Travel

Transport is one of the most common areas where mistakes happen.

Business travel costs may include:

• Mileage for your own car used for business journeys

• Fuel and maintenance for business vehicles

• Public transport

• Taxis

• Rental cars

• Parking

• Road charges

• Congestion Charge, where the journey is for business

If you use your own vehicle for business journeys, you may be able to claim mileage using HMRC-approved mileage rates. For 2026/2027, the approved mileage rate for cars and vans is 55p per mile for the first 10,000 business miles, then 25p per mile after that.

It is very important to understand the difference between:

Your own vehicle used for business

You may claim mileage for business journeys, based on business miles.

A company vehicle

The treatment can be different. The business may record actual costs such as fuel, insurance, repairs, servicing and maintenance, depending on the situation.

Mixed personal and business use

If there is personal use, only the business proportion should be claimed. For Limited Companies, personal use of a company vehicle may also create additional tax consequences, such as Benefit in Kind, depending on the vehicle and how it is used.

A good mileage log should include:

• Date of the journey

• Start and end location

• Purpose of the journey

• Client, site or job reference

• Number of miles travelled

Without a clear mileage record, a mileage claim can be difficult to justify if HMRC asks questions.

5. Employees and Subcontractors

For Limited Companies and businesses that use workers or subcontractors, these costs may be deductible if they are necessary for the business.

Examples include:

• Employee wages

• Employer National Insurance

• Pension contributions

• Staff benefits, where treated correctly

• Subcontractor costs

• Training for employees

• Uniforms and work equipment

For Limited Companies, payroll and subcontractor costs must be recorded correctly. If you work with subcontractors in the construction industry, CIS rules may apply.

It is not enough to simply pay someone as a subcontractor without checking whether CIS applies and without keeping the proper records.

6. Training, Workspace and Other Important Costs

Some indirect costs may also be deductible if they are related to your business activity.

Examples include:

• Courses

• Certifications

• Professional development

• Health and safety training

• Rent, but only the business proportion

• Utilities, but only the business proportion

• Workspace costs

• Business insurance

• Relevant professional memberships

Training costs need to be considered carefully. Training that helps maintain or improve skills used in your current trade or business is usually easier to justify than training for a completely new and unrelated business activity.

For rent and utilities, the same principle applies: if the cost is partly personal and partly business, only the business proportion should be claimed.

7. Making Tax Digital and Digital Records

HMRC is moving more and more towards digital records.

For self-employed CIS subcontractors, this means it is becoming increasingly important to keep accurate digital records for:

• Income

• CIS deductions

• Invoices

• Expenses

• Receipts

• Mileage

• Quarterly updates, if Making Tax Digital applies to you

For Limited Companies, digital record keeping is also essential for bookkeeping, Corporation Tax, VAT, payroll and CIS.

Using software such as QuickBooks can help you photograph receipts, attach them to transactions and avoid losing deductible expenses.

This is especially important in construction, where many costs are paid throughout the year and can easily be forgotten if they are not recorded immediately.

8. What Records Should You Keep?

For every business expense, you should be able to show:

• What you bought

• When you bought it

• How much you paid

• Why it was needed for business

• What proportion was business use, if there was mixed use

Useful records include:

• Invoices

• Receipts

• Bank statements

• Contracts

• Mileage logs

• CIS statements

• Payroll records

• Finance agreements

• Leasing documents

• Digital receipts

For Limited Companies, company records generally need to be kept for at least six years. For self-employed taxpayers, it is also important to keep records safely in case HMRC asks to review them.

Good records protect you. They also help make sure you do not miss expenses that could reduce your tax.

9. Common Mistakes That Can Reduce Your Refund or Create HMRC Problems

1. Not keeping receipts

Many subcontractors know they spent money on tools, materials or travel, but they no longer have proof. Without evidence, it becomes harder to support the claim.

2. Mixing personal and business costs

If a cost is used both personally and for business, only the business part should be claimed. Common examples include mobile phones, internet, vehicles and home office costs.

3. Forgetting CIS deductions

For self-employed CIS subcontractors, CIS statements are very important. They show how much you were paid and how much tax was deducted at source.

If these deductions are not included correctly, your tax refund may be wrong.

4. Thinking “deductible” means HMRC refunds the full cost

A deductible expense does not mean HMRC gives you back 100% of the cost.

It means the cost reduces your taxable profit. The actual tax saving depends on your tax rate and your overall situation.

5. Treating self-employed and LTD rules as exactly the same

Self-employed subcontractors and Limited Companies are not taxed in exactly the same way.

For self-employed workers, the tax is personal through Self Assessment.

For Limited Companies, the company’s profit is taxed through Corporation Tax, and money taken by the director may involve salary, dividends, expenses, director’s loan rules and other tax considerations.

10. Conclusion

If you work in construction through CIS or run a Limited Company in the construction sector, deductible expenses can have a major impact on your tax position.

You may be able to claim costs such as:

• Tools

• Materials

• Equipment

• PPE

• Travel

• Mileage

• Mobile phone

• Internet

• Accounting fees

• Insurance

• Software

• Subcontractor costs

• Training

• Rent or utilities used for business

However, it is important to claim everything correctly.

Expenses must be genuine, business-related, properly documented and split fairly if there is personal use.

The goal is not just to claim more. The goal is to claim correctly, legally and confidently.

Need Help?

If you want to check what expenses you can claim, how to maximise your legal tax refund, or how your company can reduce its taxable profit, we can help.

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