Glossary · UK
What is CIS Deduction Statement?
A monthly document a CIS contractor must provide to each subcontractor, showing the gross payment, the tax deduction made (20% or 30%), and the net amount paid, enabling the subcontractor to offset deductions against their own tax liability.
Full Definition
Under the Construction Industry Scheme (CIS), contractors are legally required to provide a written deduction statement to each subcontractor from whose payments a deduction has been made. The statement must be provided by the 19th of the month following the month of payment -- the same deadline as the monthly CIS300 contractor return to HMRC (though the statement goes to the subcontractor, not to HMRC). The statement must include: the contractor's name, address, and UTR (Unique Taxpayer Reference); the subcontractor's name, UTR, and verification number; the period covered; the gross amount of the payment (excluding VAT); the amount of any deduction for materials (which is excluded from the CIS calculation); the net payment subject to deduction; the rate of deduction (20% for registered subcontractors, 30% for unregistered); and the amount deducted. The subcontractor uses the statements accumulated over the tax year to prove the total CIS deductions suffered. These deductions can be offset against the subcontractor's own income tax and National Insurance liability when they complete their Self Assessment return. If the total CIS deductions exceed the total tax and NI owed, the subcontractor can claim a refund -- either through the Self Assessment return or, for subcontractors not otherwise required to file a return, by submitting form R38. Companies that suffer CIS deductions offset them against PAYE and employer NI due to HMRC. Contractors who fail to provide statements face penalties starting at GBP 300 per subcontractor per month. Statements can be issued electronically with the subcontractor's agreement.