A payment and deduction statement is the document which proves how much CIS tax has been deducted by the contractor.
When a contractor deducts the CIS tax, they must provide the subcontractor with a CIS payment and deduction statement. This is the written evidence, which the subcontractor can use to prove any tax deductions with HMRC.
We will show what information you need to include on the document, when it needs to be given to the subcontractor and provide a useable example.
There is no default template for the payment and deduction statement. Contractors can make up their own templates to send to subcontractors.
The document must however show the following information:
Contractors name
Contractors employer tax reference
Month to which the payment relates, for example the month end 5th May 2023
Gross amount
CIS qualifying materials amount
CIS tax amount
Subcontractors name
Subcontractors unique tax reference
The verification number provided by HMRC during the verification process – this is only compulsory for higher rate deductions at 30%
Where subcontractors have gross payment status there is no obligation for a contractor to provide them with a CIS payment and deduction statement.
With gross status the subcontractor suffers no CIS tax, so evidence of CIS deducted is not required. However, HMRC do consider it good practice for contractors to issue payment and deduction statements for all subcontractors.
The CIS payment and deduction statement must be provided within 14 days of the end of the tax month in which the payment was made.
As the tax months end 5th of each month the reporting deadline is therefore the 19th of the month.
For example if the subcontractor was paid on the 25th April 2023, this would fall into the reporting month ending 5th May 2023. The subcontractor must receive the statement by the 19th May 2023.
A contractor may pay a subcontractor more than once in the same month. As an example some subcontractors may wish to be paid weekly.
When this happens, the contractor can include all of the payments on a single CIS payment and deduction statement. This would therefore cover all the payments in the tax month.
Alternatively the contractor can issue several CIS payment and deduction statements one for each payment.
The choice is up to the contractor and it will typically depend on the software they are using. But, whichever option is chosen it is important to remember that the subcontractor must receive the CIS payment and deduction statements by the 19th of the month.
As mentioned above there is no default template for payment and deduction statements.
However HMRC have included in their guidance a CIS payment and deduction statement example, which shows what the document could look like.
We often find that most software use something similar to this example set by HMRC, so we would recommend contractors use this as a starting point.
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