A CIS payment and deduction statement, also called a CIS statement is the record a contractor gives a subcontractor when CIS tax has been taken from their payment. It shows how much they were paid, any materials costs and the amount deducted.
This guide covers what the statement should include, when it must be issued, how the deduction is worked out and what to do if one goes missing.
Key Takeaways
What is a CIS Payment & Deduction Statement?
Under the Construction Industry Scheme, a contractor may deduct money from a subcontractor’s payment based on the payment status given by HMRC. The deduction counts towards the subcontractor’s tax bill.
A CIS payment and deduction statement shows the payment made, allowable materials costs and the amount deducted. The subcontractor should keep it as evidence when claiming credit for CIS deductions. It is separate from the contractor’s monthly CIS return, although the figures for the same tax month should match when added together.
How CIS Deductions are Calculated
Once the subcontractor has been verified, HMRC tells the contractor which CIS treatment to apply:
- 20% for a registered subcontractor
- 30% for an unregistered subcontractor
- nothing for a subcontractor with gross payment status
Start the calculation from the invoice total, excluding VAT. Take off the subcontractor's actual cost of qualifying materials and other allowable costs consumable stores, fuel used to operate hired or owned plant (not fuel used for travelling to site), plant hired from a third party, and the cost of manufacturing or prefabricating materials. Apply the CIS rate to whatever is left.
Only materials the subcontractor bought and paid for directly, for that contract, can come out. If the subcontractor is VAT-registered, use the materials cost net of VAT. The contractor should check these costs and keep the records that back them up.
Travel and subsistence stay in the calculation, they cannot be stripped out. A subcontractor cannot deduct a notional cost for using plant they already own, but qualifying fuel to run that plant can still be deducted as a material.
Worked Example
Take a VAT-registered subcontractor doing standard-rated refurbishment work, where all the conditions for the VAT domestic reverse charge are met. The invoice is £3,900 excluding VAT: £3,000 for the work and £900 of actual materials, again excluding VAT. The subcontractor is registered for CIS and HMRC has confirmed the 20% rate.
Calculation | Amount |
|---|---|
Invoice total excluding VAT | £3,900 |
Less actual materials cost | £900 |
Amount liable to CIS deduction | £3,000 |
CIS deduction at 20% | £600 |
Amount paid to subcontractor | £3,300 |
CIS deduction due to HMRC | £600 |
These figures are illustrative. The right calculation turns on the payment, the subcontractor's actual costs, and whether the reverse charge applies.
What Must a CIS Statement Include?
Contractors can design their own CIS statement, but HMRC says it must include:
Required Information | Unprompted Disclosure |
|---|---|
Contractor’s details | The contractor’s name and employer tax reference |
Statement date | The tax month end date, or the payment date if it covers one payment |
Subcontractor’s details | The subcontractor’s name and Unique Taxpayer Reference |
Verification reference | The full reference, including any letters, where the higher deduction rate was used because the subcontractor could not be verified |
Gross payment | The payment amount excluding any VAT charged |
Materials | The qualifying materials cost removed before CIS was calculated |
CIS deduction | The amount deducted from the payment |
HMRC’s required information list does not include a statement confirming that the deduction will be paid to HMRC. Contractors may add other useful details, such as the VAT charged, the amount liable to deduction or the net payment, to make the statement easier to understand.
Below is an example of what the form may look like. Please use it as a guide when completing your Payment and deduction statement. This form may not be fully accessible with all assistive technologies. If you require support or an alternative format, please contact us.
Where to Get & Manage CIS Statements
There is no set format for a CIS statement. A contractor can design its own, as long as it carries every detail HMRC requires. HMRC also publishes a blank payment and deduction statement that works as a ready-made template.
HMRC's free CIS online service handles subcontractor verification and monthly returns. Contractors can use Commercial CIS Software instead but should check that it produces statements with all the required information. HMRC lists commercial software that can submit CIS returns. Contractors should still check that the software produces payment and deduction statements containing all the information HMRC requires.
Subcontractors get their statements from the contractor, not from HMRC. If one goes missing or is lost, ask the contractor for another, clearly marked "Duplicate". Keep these statements as evidence of the deductions taken from the payments.
When Must a Contractor Issue a CIS Statement?
If you deduct CIS from a subcontractor’s payment, you must give them a statement within 14 days of the end of the tax month. CIS tax months run from the 6th of one month to the 5th of the next, so the deadline is usually the 19th.
Worked Example
Monthly or Individual Statements
Can a CIS Statement be Sent Electronically?
What If a Subcontractor Does Not Receive a CIS Statement?
A missing CIS statement can make it harder to check your deductions or support a repayment claim. Ask the contractor for a replacement as soon as possible. If the original was lost, the new copy should be marked “Duplicate”.
If the contractor does not provide a replacement statement or has stopped trading, contact HMRC for guidance and keep any other evidence of the payment and deduction.
How UKPA Can Help?
"UK Property Accountants can help review your records, reconcile CIS deductions and assist with preparing the appropriate CIS claim or submission."
Checklist: Getting CIS Statements Right
- Check whether the subcontractor needs to be verified before you pay them
- Use the CIS rate HMRC gives you
- Work out the deduction after removing VAT and any qualifying costs paid by the subcontractor
- Make sure the statement includes all the details HMRC requires
- Add the full verification reference if the subcontractor could not be verified and the 30% rate was used
- If you make a deduction, give the statement to the subcontractor by the 19th of the following month
- Keep clear records of payments, materials and deductions for at least three years after the end of the relevant tax year
Record-Keeping & Retention
Contractors must keep records of CIS payments, materials and deductions for at least three years after the end of the relevant tax year. HMRC may ask to see them, and a penalty of up to £3,000 may apply if the records cannot be produced.
Other tax and accounting rules may require records to be kept for longer, so check which retention period applies to your business.
A Note for Contractors:
Nil Returns from April 2026
Since 6 April 2026, mainstream contractors must tell HMRC whenever they make no subcontractor payments during a CIS tax month. You can either file a nil return by the 19th or notify HMRC that your scheme will be inactive for up to six months. If you do neither, HMRC will issue a late-filing penalty.
Deemed contractors are not legally required to file a nil return when no subcontractors have been paid. However, HMRC may still issue a penalty notice if it is not told about the nil month. The penalty should be cancelled once the contractor confirms that no payments were made, but notifying HMRC in advance avoids the problem.
Frequently Asked Questions
No. An invoice is sent by the subcontractor to request payment. A CIS statement is provided by the contractor and records the gross payment, qualifying materials costs and the CIS deduction taken.
A 30% deduction generally means HMRC’s verification process did not confirm that you could be paid at the standard 20% rate or gross. Check that your legal name, UTR, National Insurance number or company details are correct, then ask the contractor to verify you again using the correct information.
The deduction is treated as an advance payment towards your Income Tax and Class 4 National Insurance (for sole traders and partnerships) or your Corporation Tax and PAYE/NIC liabilities (for limited companies). Any repayment or remaining balance due will depend on your overall tax and NIC position and how the CIS deductions are claimed on your Self-Assessment or company tax return.
Ask the contractor for replacement statements first. If the contractor has stopped trading or does not provide them, contact HMRC for guidance and keep any other evidence of the payments and deductions. HMRC may ask for details about you, the contractor, the relevant payments and any supporting records.
Subcontractors should use the payment and deduction statements provided by their contractor. HMRC’s CIS online service is mainly for contractors.
There is no fixed refund. CIS deductions are advance tax payments, and the final amount depends on your income, expenses and overall tax position.
Conclusion
A CIS payment and deduction statement may seem routine, but mistakes can lead to penalties, delayed refunds and disputes. Contractors should calculate deductions correctly, issue statements on time and keep accurate records. Subcontractors should check every statement and act quickly if one is missing.
If the figures do not match or a refund is being held up, deal with it early. UK Property Accountants can help reconcile CIS records, trace missing statements and prepare the correct claim.
WORK WITH UK PROPERTY ACCOUNTANTS
"UK Property Accountants can help review your records, reconcile CIS deductions and assist with preparing the appropriate CIS claim or submission."
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