CIS payment and deduction statements explained

What the statement is

Under the Construction Industry Scheme, contractors deduct money from subcontractors' payments and pass it to HMRC: 20% if you're registered and they can verify you, 30% if not, and nothing if you have gross payment status. GOV.UK says that each month, your contractor must give you a payment and deduction statement showing what they paid you and the deductions they took. They must give it to you within 14 days of the end of each tax month.

CIS tax months run from the 6th of one month to the 5th of the next, so a statement for the month ending 5 November should reach you by 19 November.

What it should show

Statements vary in design, but you'd normally expect to see:

• the contractor's name and employer's (CIS) reference
• your name and Unique Taxpayer Reference (UTR), and often your verification number
• the tax month the payment falls in
• the gross amount paid
• the cost of materials, which isn't subject to deduction
• the amount the deduction was calculated on (gross less materials)
• the amount deducted

If you weren't paid in a particular tax month, there's usually no statement for that month from that contractor.

The figures should match the labour and materials split on your invoice, as shown in our CIS invoice guide.

How to check it against your invoices

Do this every month. It takes five minutes and catches mistakes while they're easy to fix.

1. Match payments to invoices. Which invoices did this payment cover? Weekly invoices paid in a given tax month should add up to the gross on the statement.
2. Check the materials figure. If you listed materials separately on your invoices, they should appear here and not be deducted from. If they've been ignored, ask why.
3. Check the rate. Deduction ÷ (gross − materials) should be 0.20. If it's 0.30, the contractor couldn't verify you, or you're not registered. Sort this out with them and HMRC straight away, because the extra 10% is only recovered at the end of the year.
4. Check VAT is excluded. CIS is never deducted from VAT.

Worked example

You invoiced four weeks of labour at £900 each (£3,600) plus £120 of fixings you bought. The statement should show gross £3,720, materials £120, deduction based on £3,600, and a deduction of £720. You should have received £3,000.

Why keeping them matters

CIS deductions are advance payments towards your tax and National Insurance. For sole traders and partners, GOV.UK says you record your total pay before deductions as income on your Self Assessment return, and the total deductions as "CIS deductions". HMRC then takes the deductions off your bill, and you may get a refund. HMRC may ask for evidence, so keep every statement along with your invoices. Limited companies use the deductions differently, through their payroll EPS, and must keep records too.

Keep them with your business records. For sole traders, GOV.UK says that's at least 5 years after the 31 January submission deadline for the tax year.

If a statement is missing or wrong

• Ask the contractor first. GOV.UK says to ask them for it, or for a replacement if you've lost it.
• If the figures are wrong, speak to the contractor. They may need to correct their monthly return to HMRC.
• If you can't get it, for example because the contractor has gone out of business, GOV.UK says to write to HMRC with your name, address and UTR, the contractor's name and address, their tax reference if you know it, the payment dates or tax months, and the reason you don't have the statements. The postal address is on GOV.UK.

The totals from your statements feed into your tax return, see claiming back CIS deductions. Keep them as long as your invoices: how long to keep invoices.

Practical tips

• Keep a simple spreadsheet: tax month, contractor, gross, materials, deduction, net received.
• Put the site and week on every invoice so you can match them up later.
• Scan or photograph paper statements as soon as they arrive.
• Check your bank receipts against the "net" figure, not the gross.