Written by Peter Allen MAAT, co-founder and Finance Director of Buzz Accounting, with more than 20 years in accountancy.
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Your name and employer tax reference; the end date of the tax month the payment falls in; the subcontractor's name and Unique Taxpayer Reference; the verification number where the subcontractor could not be verified; the gross amount paid; the cost of materials that reduced the deduction; and the amount of the deduction itself. It has to reach them within 14 days of the end of the tax month, the same window as the return. Where you pay somebody gross, no statement is required at all — although CIS 340 calls issuing one anyway good practice, and it saves an argument later.
Where a deduction has been made at the higher rate, the verification reference must appear complete with the letter on the end of it. That suffix is the evidence of an unmatched verification, and it is what tells a subcontractor why they are on 30%.
A statement must be issued for each tax month in which a payment was made, within 14 days of the end of that tax month. It is a legal duty, and one of the obligations most often missed by contractors who otherwise file on time.
The statement is the only document that shows what was deducted and on what basis. A bank receipt shows a net figure and nothing else — it cannot tell you whether the materials figure was right, whether travel was correctly left inside the base, or why the rate was what it was. When it comes to reconciling CIS suffered for a refund claim or a company's EPS offset, the statements are the evidence and the bank is not.
If you are not receiving them, ask. If they do not arrive, HMRC holds what the contractor reported against your UTR.
This question is part of CIS returns and verification, which covers the whole area.
Send us three months of payment and deduction statements. We will tell you what is wrong, what it is costing, and whether gross payment status would fix it.