CIS subcontractors do not get a traditional payslip. They get a payment and deduction statement instead. It is a different document, issued by the contractor rather than an employer. But it still gives you the information you need for self-assessment. This guide walks through each section.
What is a CIS payment and deduction statement?
A CIS payment and deduction statement is the document a CIS contractor must give every subcontractor each time they make a payment with a CIS deduction. It is a legal requirement under the Construction Industry Scheme. The contractor keeps a copy. You keep a copy.
This is different from an employed worker’s payslip. There is no employment relationship behind it. The contractor is simply confirming what you invoiced, what they deducted, and what they passed to HMRC.
If you receive no deduction because you have GPS, or if the deduction is nil, a statement is not always required for nil deduction payments. Even so, many contractors issue one for record keeping.
What must the statement show?
A CIS payment and deduction statement must include:
- The contractor’s name, address, and PAYE reference
- The subcontractor’s name and UTR
- The gross amount of the payment before deductions
- Any materials payment included in the gross amount
- The net amount, which is the amount subject to deduction
- The deduction rate applied and the deduction amount
- The net payment passed to the subcontractor
That last figure, the net payment, is what lands in your bank account. The lines above it show how HMRC got its share.
Reading the statement line by line
Gross payment. This is the total value of your invoice, labour and materials combined. It is the agreed price for the work.
Materials deduction. If your invoice includes materials costs, this is the amount excluded from the CIS deduction calculation. The contractor needs your invoice to show the split. If there are no materials, this line is zero.
Net amount subject to deduction. This is gross payment minus materials. The deduction rate is applied to this figure.
Deduction rate. Either 20% for registered subcontractors, 30% for unregistered subcontractors, or 0% for GPS. See CIS deduction rates for a full explanation of each.
Deduction amount. This is the pound amount taken as the deduction. It equals the deduction rate multiplied by the net amount. The contractor pays this to HMRC for you.
Net payment to you. This is what you actually receive, after the deduction is taken off.
Why does the materials deduction matter?
If you have real materials costs, put them on the invoice and keep them separate from labour. A contractor who does not split the invoice correctly will deduct CIS on the full amount, including materials. That means more is deducted than HMRC requires.
The contractor does not lose anything by getting the split wrong. The extra deduction is your problem. You can get it back at year end, but only if you keep your receipts and records.
Always raise invoices that clearly separate labour from materials. Always check the statement to make sure the materials figure matches your invoice.
How do you use the statement in self-assessment?
Collect all your CIS payment and deduction statements for the tax year. The total deduction amount across all statements is your “CIS deductions suffered.” Put that figure into your self-assessment return, and HMRC credits it against your income tax and Class 4 NIC bill.
If your deductions suffered are higher than your annual tax liability, HMRC refunds the difference. If the bill is higher, you pay the balance.
Keep statements for at least six years. HMRC can ask about old returns, and you will need the original statements to back up the figures.
See CIS and self-assessment for how to enter CIS deductions in your return.
What if your statement has errors?
Check every statement before you file it. Common errors include a wrong materials figure, the wrong deduction rate, or an incorrect UTR. Contact the contractor immediately if anything is wrong. They must reissue a corrected statement.
A wrong deduction figure on your statement leads to a wrong figure in your self-assessment. HMRC checks your return against the monthly returns filed by the contractors who paid you. If the figures do not match, it will ask questions.
How is this different from an umbrella payslip?
An umbrella payslip is an employed worker’s pay document. It shows gross wage, employer NIC, employee NIC, income tax, pension contributions, and net pay. A CIS payment and deduction statement shows a self-employed payment with a single CIS deduction. The structure, purpose, and tax treatment are completely different.
Working through an umbrella company means employment. CIS means self-employment. The documents reflect that difference.
Some construction workers find umbrella PAYE simpler because there is one employer, one PAYE payslip, and no self-assessment. Contact the CIS payroll service to compare both options.
Frequently Asked Questions
What is a CIS payment and deduction statement?
It is the document a CIS contractor must give subcontractors each time they make a deducted payment. It shows the gross amount, materials deduction, amount subject to deduction, deduction rate, deduction amount, and the net payment to the subcontractor.
What is the “net amount subject to deduction” on a CIS statement?
It is the gross payment minus any materials included in the invoice. CIS deductions apply only to the labour element, not to materials. The deduction rate is applied to this net amount.
How do I use CIS payment statements in my self-assessment?
Add up all the CIS deduction amounts across your statements for the tax year. That total is your “CIS deductions suffered.” Enter it on your self-assessment return. HMRC credits it against your income tax and NIC bill.
What if my CIS payment statement has the wrong materials figure?
Contact the contractor straight away. They must reissue a corrected statement. A wrong materials figure leads to an incorrect deduction amount, which then affects your self-assessment. Keep all original statements for at least six years.
How is a CIS statement different from an umbrella payslip?
An umbrella payslip is an employed worker’s document showing PAYE deductions. A CIS statement is for self-employed workers. It has one deduction taken by the paying contractor. The structure and tax treatment are different.
