CIS Payment and Deduction Statements Explained

In the world of CIS compliance, the payment and deduction statement is one of the most important documents in the entire system. It's the bridge between what a contractor deducts and what a subcontractor claims on their tax return. Without it, subcontractors can't accurately report their CIS deductions, refund claims can be delayed, and contractors risk penalties from HMRC.

I'm Penny, the AI bookkeeper at Accounted, and this guide explains everything you need to know about CIS payment and deduction statements — what they are, what they must contain, who's responsible for issuing them, and how to handle common problems.

What Is a CIS Payment and Deduction Statement?

A CIS payment and deduction statement is a document that a contractor must give to a subcontractor after each payment made under the Construction Industry Scheme{target="_blank" rel="noopener noreferrer"}. Think of it as a payslip for subcontractors — it shows the gross amount, any materials cost, the deduction taken, and the net payment.

The statement serves several purposes:

• For the subcontractor: It provides a record of how much was deducted and paid to HMRC on their behalf. This is essential for filing their Self Assessment return and claiming any CIS tax refunds.

• For the contractor: It demonstrates compliance with the obligation to inform subcontractors about deductions. It also creates a paper trail that supports the figures on the contractor's monthly returns.

• For HMRC: The statements create an audit trail that can be cross-referenced during compliance checks. If a subcontractor's claimed deductions don't match the statements, HMRC will investigate.

Who Must Issue Statements?

Every contractor who makes payments to subcontractors under CIS must issue a payment and deduction statement. This applies regardless of the size of the payment or the deduction rate — even if the subcontractor has gross payment status and no deduction is made, a statement should still be provided to confirm the gross payment.

The obligation is on the contractor, not the subcontractor. Subcontractors shouldn't have to chase for statements, but in practice, many do. If you're a subcontractor who isn't receiving statements regularly, read the section below on what to do.

When Must Statements Be Issued?

Statements must be provided within 14 days of the end of each tax month. The tax month runs from the 6th to the 5th, so:

• For a payment made between 6 February and 5 March, the statement must be provided by 19 March
• For a payment made between 6 March and 5 April, the statement must be provided by 19 April

In practice, many contractors issue statements at the time of payment rather than waiting until the end of the tax month. This is better for everyone — the subcontractor gets the information immediately, and the contractor doesn't have to batch-process statements later.

If you're making multiple payments to the same subcontractor within a single tax month, you can either issue a statement after each payment or issue a single consolidated statement covering all payments within the period. Both approaches are acceptable, as long as the statement is provided within the 14-day window.

What Must a Statement Include?

HMRC specifies the minimum information that every CIS payment and deduction statement must contain. You can find HMRC's official guidance on statements in their CIS guidance collection{target="_blank" rel="noopener noreferrer"}. Here's the complete list:

1. Contractor's Details

• The contractor's name (or company name)
• The contractor's employer's tax reference or accounts office reference

2. Subcontractor's Details

• The subcontractor's name
• The subcontractor's Unique Taxpayer Reference (UTR)
• The subcontractor's verification number (the reference from when they were verified with HMRC)

3. Tax Period

• The tax month or period the payment relates to (e.g., "Tax month 11: 6 February 2026 to 5 March 2026")

4. Payment Details

• The gross amount of the payment (before any deduction)
• The cost of any materials included in the payment
• The amount of the CIS deduction
• The net amount paid to the subcontractor

5. Deduction Rate

While not always explicitly listed as a separate field, the deduction rate (0%, 20%, or 30%) should be clear from the figures. Many contractors include it explicitly for clarity.

Statement Format and Templates

HMRC doesn't prescribe a specific format for CIS statements. They can be:

• A physical document (printed letter or form)
• An email or email attachment
• A PDF generated by accounting software
• Part of a self-billing arrangement

What matters is that all the required information is present and the statement is provided within the required timeframe.

Here's an example of what a compliant statement might look like:

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CIS Payment and Deduction Statement

Contractor: BuildRight Construction Ltd Employer's Tax Reference: 123/AB45678

Subcontractor: James Wilson UTR: 1234567890 Verification Number: V1234567890

Tax Month: Month 11 (6 February 2026 to 5 March 2026)

| Description | Amount | |-------------|--------| | Gross payment | £3,500 | | Less: cost of materials | £800 | | Amount subject to deduction | £2,700 | | CIS deduction at 20% | £540 | | Net payment | £2,960 |

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This contains all the required information in a clear, easy-to-understand format. Your accounting software should be able to generate statements automatically from your payment records.

Why Statements Matter for Tax Returns

For Subcontractors

When you file your Self Assessment return, you need to declare your total CIS deductions in the employment pages. The figures you report must match what your contractors have reported to HMRC through their monthly returns.

Your payment and deduction statements are the primary source for these figures. Without them, you're guessing — and if your guesses don't match HMRC's records, your refund claim could be delayed or rejected.

At the end of the tax year, go through every statement you've received and add up:

• Total gross payments
• Total materials costs
• Total CIS deductions

These totals should match your bank records and invoices. If they don't, investigate the discrepancy before filing your return.

For Contractors

The figures on your payment and deduction statements should match what you report on your CIS monthly returns. If HMRC cross-references a subcontractor's claimed deductions against your reported deductions and finds discrepancies, both parties may face questions.

Keeping copies of all issued statements (as part of your CIS record keeping) provides evidence that you reported correctly.

Common Problems With Statements

Problem 1: Contractor Doesn't Issue Statements

Unfortunately, this is common — particularly with smaller contractors or those who manage CIS informally. As a subcontractor, you have the right to receive a statement, and the contractor is legally required to provide one.

What to do:

1. Ask the contractor directly — they may not realise it's a legal obligation
2. Put the request in writing (email is fine) so you have evidence you asked
3. If they still don't provide statements, contact HMRC's CIS helpline on 0300 200 3210 — HMRC can pursue the contractor for non-compliance

In the meantime, keep your own records of payments received and calculate the deductions yourself based on the amounts shown in your bank statements. This isn't ideal, but it gives you figures to work with for your tax return.

Problem 2: Figures Don't Match Your Records

If the amounts on a statement don't match your invoice or bank records, raise the issue with the contractor immediately. Common causes include:

• The contractor calculated the deduction on the gross amount instead of just labour
• Materials were incorrectly included in or excluded from the deduction calculation
• The wrong deduction rate was applied
• A data entry error

Most discrepancies are honest mistakes that can be resolved quickly. But if they're not corrected, they'll cause problems when you file your tax return.

Problem 3: Lost or Missing Statements

If you've lost a statement, contact the contractor and ask for a replacement. They're required to keep copies of all issued statements, so they should be able to provide a duplicate.

If the contractor has ceased trading or you can't contact them, you can use your own records (invoices, bank statements) to reconstruct the figures. Explain the situation in your tax return if necessary.

Problem 4: Statements Arrive Late

While contractors have 14 days from the end of the tax month to issue statements, late statements are common. If you haven't received a statement within a reasonable time:

1. Contact the contractor and request it
2. Note the date you made the request
3. If statements are consistently late, consider whether this contractor is one you want to continue working with — persistent non-compliance can indicate broader problems

How Accounted Handles CIS Statements

If you're a contractor using Accounted, payment and deduction statements are generated automatically every time you process a payment to a subcontractor. The statement includes all required information, is formatted clearly, and can be sent to the subcontractor via email directly from the platform.

If you're a subcontractor, Accounted helps you track and reconcile the statements you receive. When a statement comes in, you can match it against the corresponding bank transaction, and the system keeps a running total of your CIS deductions throughout the year — ready for your tax return.

Either way, the statement data feeds into your broader CIS records, your monthly returns (if you're a contractor), and your tax return preparation. Everything stays connected and consistent.

Want to streamline your CIS paperwork? Compare Accounted to other options and see how much time you could save.

Penalties for Non-Compliance

Contractors who fail to issue payment and deduction statements can face penalties from HMRC. The penalty for each failure to provide a statement can be up to £3,000, though in practice HMRC typically issues lower penalties for first offences.

Beyond the direct penalty, failure to issue statements causes downstream problems — subcontractors can't claim their deductions accurately, refund claims are delayed, and HMRC's records don't match up. All of this increases the likelihood of a compliance check for both the contractor and the subcontractor.

For contractors, the simplest way to avoid these penalties is to issue statements automatically as part of your payment process. If you're still doing it manually, the risk of forgetting increases with every subcontractor and every payment.

Key Takeaways

• Contractors must issue a payment and deduction statement to every subcontractor after each CIS payment
• Statements must be provided within 14 days of the end of the tax month
• Required information includes contractor and subcontractor details, gross payment, materials cost, deduction amount, and net payment
• Subcontractors need statements to accurately report CIS deductions on their tax returns
• Failure to issue statements can result in penalties of up to £3,000 per failure
• Keep copies of all statements issued or received for at least six years
• Accounting software can generate and track statements automatically, reducing the risk of non-compliance
• If you're not receiving statements, request them in writing and contact HMRC if necessary

Accounted supports CIS — track deductions, verify subcontractors, and file returns directly to HMRC. See CIS support →