Subcontractor Verification and Deduction Statements
Within the construction industry, managing subcontractors is more than just paying invoices. Under the Construction Industry Scheme (CIS), contractors must verify subcontractors with HMRC and issue deduction statements where tax has been withheld.
At Crown Accountants, we take care of this entire process – ensuring you stay compliant with HMRC while building strong, transparent relationships with your subcontractors.
What is subcontractor verification?
Before paying a subcontractor for the first time, contractors are required by law to verify their details with HMRC. This process confirms:
Whether the subcontractor is registered with CIS.
What rate of tax deduction should be applied (20%, 30%, or 0% if they have gross payment status).
Verification is essential to avoid errors and penalties, and to ensure subcontractors are taxed correctly.
What are deduction statements?
If deductions are made from a subcontractor’s payment, contractors must provide them with a deduction statement (sometimes called a CIS statement or voucher).
This statement includes:
The contractor’s name and UTR (Unique Taxpayer Reference).
The subcontractor’s name and UTR.
The amount paid (before deduction).
The amount of CIS tax deducted.
The net payment made.
Deduction statements are not optional – they are a legal requirement and form part of the subcontractor’s records for their Self Assessment tax return.
Why subcontractor management matters
Failure to correctly verify subcontractors or issue deduction statements can result in:
HMRC penalties.
Incorrect tax deductions (leading to disputes).
Delays in subcontractors being able to reclaim overpaid tax.
Strained working relationships.
By outsourcing this process to Crown Accountants, contractors can focus on running projects while we ensure every CIS obligation is met.
Faqs
Do I need to verify subcontractors every time I pay them?
No. Once verified, a subcontractor remains valid until the end of the current and the next two tax years, unless HMRC tells you otherwise.
What if a subcontractor is not registered for CIS?
If a subcontractor is unregistered, you must deduct tax at the higher rate of 30% until they register.
How often should deduction statements be issued?
Deduction statements must be provided to subcontractors monthly, in line with CIS return submissions.
Can deduction statements be electronic?
Yes – HMRC allows deduction statements to be issued either on paper or electronically, provided they contain all the required details.
Do contractors also need to submit CIS returns?
Yes. In addition to issuing deduction statements to subcontractors, contractors must submit a monthly CIS return to HMRC, detailing all payments and deductions.
Why choose Crown Accountants?
At Crown Accountants, we specialise in handling CIS compliance for contractors and subcontractors. Our services include:
Subcontractor verification with HMRC.
Preparation and issue of deduction statements each month.
Monthly CIS returns submitted to HMRC on your behalf.
Full HMRC correspondence regarding subcontractor compliance.
Integration with VAT and company accounts to keep your records consistent.
By managing the process end-to-end, we save you time, reduce your risk of penalties, and ensure your subcontractors are kept fully informed.
With Crown Accountants, your subcontractor verifications and deduction statements will always be handled accurately, on time, and in full compliance with HMRC rules.