What Records Should I Keep for CIS?

At Towerstone Accountants we provide specialist CIS accountancy services for contractors, subcontractors, and construction businesses across the UK. We created this webpage for people working in construction who want clear guidance on CIS deductions, refunds, verification, and monthly return responsibilities, without jargon. Our aim is to help you stay compliant with HMRC, avoid penalties, and keep your cash flow and records under control.

Keeping the right records for CIS is one of those areas that feels dull until it suddenly becomes very important. I see this time and again when HMRC carries out a CIS compliance check and asks for records going back several years. Businesses that kept good records usually get through the process calmly and quickly. Those that did not often find themselves scrambling to recreate information, explain gaps, and deal with penalties that could have been avoided.

CIS record keeping is not just about ticking boxes for HMRC. It is about protecting yourself as a contractor or subcontractor, making sure tax is handled correctly, avoiding disputes, and ensuring that any CIS deductions suffered or made are properly credited. The challenge is that CIS sits alongside PAYE, VAT, and normal accounting records, which means it is easy to assume something is covered when it is not.

In this article I want to explain clearly what records you are required to keep for CIS, why each type of record matters, how long you need to keep them, and the common gaps I see when businesses are reviewed. This is written from practical experience of dealing with HMRC CIS enquiries, helping clients put records back together, and setting up systems that stand up to scrutiny.

Why CIS record keeping matters so much

HMRC places a lot of emphasis on CIS records because CIS relies heavily on accurate reporting by contractors. HMRC does not see payments as they happen. It relies on monthly CIS returns, verification data, and supporting records to understand what has gone on.

If HMRC cannot see clear records, it may assume the worst, even if the underlying activity was genuine. Poor records often lead to estimated assessments, penalties, and extended investigations, not because HMRC wants to be difficult, but because it has no reliable evidence to work with.

Good records shift the balance of power. They allow you to answer questions confidently rather than defensively.

Who has CIS record keeping obligations

CIS record keeping obligations apply to both contractors and subcontractors, although the nature of the records differs slightly.

Contractors must keep records relating to subcontractors they pay, deductions made, and returns submitted.

Subcontractors must keep records relating to payments received, deductions suffered, and statements provided.

If you are both a contractor and a subcontractor, which is very common for limited companies, you will have obligations on both sides.

Core CIS records every contractor must keep

If you are registered as a CIS contractor, HMRC expects you to keep clear and complete records showing how you have applied the scheme.

At a minimum, this includes records of who you have paid, what work was done, how much was paid, and what deductions were made.

These records should be sufficient to allow HMRC to trace a payment from invoice, to deduction, to monthly CIS return, and ultimately to the subcontractor’s tax record.

Subcontractor details and verification records

One of the most important sets of records relates to subcontractor verification.

You must keep records showing:.

• The subcontractor’s name or trading name

• Their Unique Taxpayer Reference

• Their National Insurance number if they are an individual

• Their company registration number if they are a limited company

• The date verification was carried out

• The CIS deduction rate confirmed by HMRC

This information shows that you verified the subcontractor correctly and applied the correct deduction rate.

HMRC often asks for proof of verification during enquiries. If you cannot show when and how verification took place, HMRC may treat payments as unverified.

Contracts and agreements with subcontractors

While not strictly a CIS record in itself, written contracts or agreements with subcontractors are extremely important supporting evidence.

They help demonstrate:.

• The nature of the work

• That the relationship is genuinely subcontracting

• How payment is structured

• Who is responsible for materials and defects

During CIS reviews, HMRC often looks at contracts to assess employment status as well as CIS compliance.

Keeping signed agreements, even simple ones, strengthens your position significantly.

Invoices received from subcontractors

You must keep copies of all invoices received from subcontractors.

These invoices should clearly show:.

• The subcontractor’s details

• The date of the invoice

• A description of the work

• The labour element

• Any materials charged separately

• VAT if applicable

Clear invoices are critical because CIS deductions are calculated on labour only. If labour and materials are not separated, HMRC may treat the full amount as labour.

Invoices form the foundation of your CIS calculations, so they must be retained in full.

Records of payments made

You must also keep records showing when and how subcontractors were paid.

This usually includes bank statements, payment reports, or remittance advice.

HMRC often cross checks CIS returns against bank records to ensure that payments reported match payments made.

If payments appear in the bank but not on CIS returns, or vice versa, this will trigger questions.

CIS deduction calculations

Contractors should keep records showing how CIS deductions were calculated.

This may be part of your accounting software, spreadsheets, or manual records, but it must be clear.

HMRC expects to be able to see:.

• Gross labour amount

• Deduction rate applied

• Amount of CIS tax deducted

• Net amount paid

If these figures are buried or unclear, HMRC may assume deductions were incorrect.

Monthly CIS returns submitted to HMRC

Copies of all CIS monthly returns must be kept.

This includes:.

• Returns showing payments and deductions

• Nil returns where no subcontractors were paid

HMRC expects returns to be kept even if they were submitted electronically, as access to online records can change over time.

During enquiries, HMRC often asks for copies of returns alongside underlying records to check consistency.

CIS payment records

You should keep records showing CIS deductions paid to HMRC.

This includes payment confirmations, bank records, and HMRC statements.

HMRC may check that deductions reported on returns were actually paid over by the due date.

Late payment records are particularly important if penalties or interest are being considered.

Records relating to nil returns

Nil returns are easy to forget but important to record.

If you submit a nil return, keep evidence that it was submitted and for which period.

If your CIS scheme is inactive for a period, keep records of when HMRC was notified.

Missing nil returns are one of the most common reasons for penalties.

CIS records subcontractors must keep

If you are a subcontractor, your CIS records focus on income and deductions suffered rather than payments made.

These records are essential for claiming CIS deductions correctly and avoiding overpaying tax.

CIS deduction statements

CIS deduction statements provided by contractors are critical records for subcontractors.

You must keep:.

• Monthly CIS statements from each contractor

• Statements showing gross payment and deduction

• Statements showing the contractor’s details

These statements are your evidence that tax was deducted and paid to HMRC on your behalf.

Without them, claiming CIS deductions on your tax return becomes much harder.

Invoices issued to contractors

Subcontractors must keep copies of all invoices issued.

These invoices should show labour, materials, and VAT clearly.

Invoices help reconcile CIS statements and support VAT returns.

HMRC often asks subcontractors to provide invoices if there is a mismatch between deductions claimed and HMRC records.

Records of payments received

Bank statements or payment reports showing payments received are essential.

These allow you to match invoices, CIS statements, and actual receipts.

If a payment does not match a CIS statement, this should be queried early rather than left until year end.

Accounting records showing CIS deductions suffered

CIS deductions should be recorded clearly in your accounting records.

For sole traders, these deductions are claimed through Self Assessment.

For limited companies, they are usually offset against PAYE or Corporation Tax.

Poor recording here is one of the main reasons subcontractors miss refunds or face HMRC delays.

VAT records where CIS applies

VAT records should be kept separately from CIS records, but they must align.

You should keep VAT invoices, VAT returns, and supporting schedules showing how VAT was calculated.

CIS deductions do not affect VAT, but HMRC often reviews both together, so consistency matters.

Employment status evidence

One area HMRC increasingly looks at during CIS checks is employment status.

Records that support genuine subcontracting include:.

• Contracts

• Evidence of multiple clients

• Insurance certificates

• Tool ownership

• Substitution arrangements

While not strictly CIS records, these can be crucial if HMRC questions whether CIS should have applied at all.

How long CIS records must be kept

HMRC requires CIS records to be kept for at least six years.

This period can extend if an enquiry is opened or if returns are amended.

In practice, keeping records for longer is often sensible, particularly for contracts that span multiple years.

Digital storage makes long term retention much easier than it used to be.

Digital versus paper records

HMRC accepts digital records, paper records, or a mix of both.

What matters is that records are readable, complete, and accessible.

Digital records are generally easier to search and back up, but they must be stored securely.

If you use accounting software, ensure data is not lost when subscriptions change or software is updated.

Common CIS record keeping mistakes I see

Some mistakes come up repeatedly.

One is relying on bank statements alone without invoices or CIS statements.

Another is assuming accounting software records are enough without checking how CIS is set up.

I also see missing verification records, missing nil returns, and incomplete subcontractor details.

These gaps often only come to light during HMRC enquiries, when it is much harder to fix them.

How HMRC uses CIS records during enquiries

During a CIS enquiry, HMRC will usually request a sample of records first.

They may then expand the scope if issues are found.

Having organised records allows you to respond quickly and accurately, which often limits how far the enquiry goes.

Disorganised records tend to lead to broader reviews.

Practical tips for good CIS record keeping

Good CIS record keeping is about routine rather than heroics.

Simple steps include keeping a checklist for subcontractor onboarding, storing verification results with subcontractor records, reconciling CIS monthly, and reviewing CIS accounts regularly rather than once a year.

Consistency matters more than complexity.

Using accounting software to support CIS records

Accounting software can be very helpful for CIS record keeping, but only if it is set up correctly.

Software should store verification details, calculate deductions accurately, retain CIS returns, and track payments.

However, software does not replace the need to understand what records are required.

Manual checks are still important.

When to get help with CIS records

If your CIS records are incomplete or you are unsure whether they meet HMRC requirements, getting advice sooner rather than later is sensible.

Putting records in order before HMRC asks is far easier than doing it under pressure.

From experience, many CIS issues are resolved simply by improving record keeping.

Final thoughts

So what records should you keep for CIS. The answer is more than many people expect, but none of it is unreasonable.

HMRC expects you to be able to show who you paid, why you paid them, how much you paid, what tax was deducted, and that the correct processes were followed.

For subcontractors, HMRC expects you to be able to prove what was deducted on your behalf and claim it correctly.

Good CIS records are not just about compliance. They protect your cash flow, reduce stress, and give you confidence if HMRC ever comes knocking.

From experience, CIS problems rarely start with bad intentions. They start with missing records. Keeping the right records turns CIS from a risk into a routine.

You may also find our guidance on What expenses can CIS subcontractors claim and Do I still need to complete a Self Assessment if I am under CIS helpful when dealing with related CIS questions. For a broader overview of CIS rules, compliance, and support, you can visit our cis guidance hub.