CIS paperwork for subcontractors: what you need and when

The paperwork at a glance

1. Registration

GOV.UK says to register for CIS if you work for a contractor as a sole trader, limited company owner or partner. To register you need your legal business name (and trading name if different), your Unique Taxpayer Reference (UTR), your VAT number if you have one, and the date you started trading. If you do not have a UTR, you register as a new business for Self Assessment and choose "working as a subcontractor", which registers you for both at once. Registering online puts you on the standard 20% deduction. If you do not register, contractors must deduct 30%. See how to register as a CIS subcontractor.

2. Details you give the contractor

When you start with a contractor, GOV.UK says to give them the exact details you gave when you registered, including your UTR and legal business or trading name. They use these to verify you with HMRC. If they cannot verify you, the higher 30% rate can apply. Keep a note of exactly what you gave and when. Typing a trading name differently from your registration is a common cause of trouble.

3. Invoices

Your invoice should show labour and materials on separate lines. GOV.UK says contractors will not take CIS deductions from VAT, consumable stores, plant hired for the job, manufacturing or prefabricating materials, or materials you paid for directly. They may ask for evidence such as receipts, and if you have none they will estimate the cost of the materials. So keep supplier receipts with each invoice. See what to include on a CIS invoice and download the free CIS invoice template.

4. Payment and deduction statements

Each month your contractor must give you a statement showing what they have paid you and the deductions they took, within 14 days of the end of each tax month. A tax month runs from the 6th to the 5th: for example, 6 May to 5 June, with the statement due by 19 June. If a statement is missing, ask for it. If the figures look wrong, talk to the contractor. If you cannot get statements, for example because the contractor has gone out of business, GOV.UK says to write to HMRC with your name, address, UTR, the contractor's details, the payment dates and why you do not have the statements. See CIS payment and deduction statements.

5. Records to keep

• Copies of every invoice and the timesheets behind them.
• Every payment and deduction statement, in order.
• Receipts for materials and other costs.
• Bank statements showing the payments in.
• Any self-billed invoices or remittances from the contractor.

GOV.UK says sole traders must keep records for at least 5 years after the 31 January submission deadline for the tax year. See how long to keep invoices.

6. Year end: tax return and refunds

Deductions count as advance payments towards your tax and National Insurance. At year end, add up the deductions on your statements and report them on your Self Assessment return. If they come to more than your tax bill, you can claim the difference back. The CIS refund calculator gives an estimate and claiming back CIS deductions explains the steps. To keep more of each payment, see gross payment status.

Worked example: checking one month

Lee invoices a contractor £740.00 of labour in a month and buys no materials. At 20%, the deduction is £148.00 and he should be paid £592.00. When the statement arrives it should show £740.00 paid for labour and £148.00 deducted. If it shows £222.00, the contractor has used the 30% rate and Lee should ask why: perhaps his details did not verify. Without his own invoice copy, he would not spot the difference.

This is general information, not tax advice.