Why CIS record keeping matters
The Construction Industry Scheme generates a paper trail on both sides of every payment: deductions taken at source, monthly returns filed, verification numbers logged. HMRC holds a detailed dataset for every contractor and subcontractor in the scheme. Where your records and HMRC's records diverge, you need documentation to explain or challenge the gap. Without it, HMRC estimates, and the estimate is almost always worse than the truth.
For subcontractors, the consequences are direct: no receipts means smaller expense deductions, which means a smaller refund than you are owed. For contractors, gaps in verification records or CIS300 copies make a compliance check significantly harder to close, and from April 2026 the verification record is also your evidence of the due-diligence duty that protects your Gross Payment Status under the Finance Act 2026 "should have known" standard.
Our guide to contractor monthly responsibilities under CIS covers the CIS300 filing obligations in detail. This guide focuses on what to retain and for how long.
Records subcontractors must keep
CIS payment and deduction statements
Every contractor who deducts CIS from your payments must issue a payment and deduction statement by the 19th of the following tax month. Each statement shows the contractor's details, your details, the gross payment, the materials element excluded from the deduction base, the deduction rate and amount, and the net amount paid. These statements are the foundation of your Self Assessment return and any refund claim. Keep every one, organised by contractor and tax month. If a statement is missing, chase it before the year end.
Invoices issued, bank statements and HMRC correspondence
Keep a copy of every invoice you raise (they establish gross turnover and cross-check against the deduction statements you receive), at least 6 years of bank statements (they corroborate net receipts and back up expense claims when a receipt is unavailable), and all HMRC correspondence including UTR and National Insurance number confirmation. If HMRC queries your registration or a deduction rate, the correspondence trail resolves it quickly.
Expense receipts
Your taxable profit is turnover minus allowable expenses, and the expenses are where most refund value sits. Keep receipts for tools and equipment, PPE and workwear, van running costs (fuel, insurance, servicing, MOT, road tax), business phone use, trade association memberships and any training directly relevant to the work. Where a receipt is unavailable, a bank or card statement is better than nothing, but a clear receipt is always preferable. Our guide to allowable expenses for CIS subcontractors covers each category in full.
Mileage log
Mileage is one of the largest and most frequently underclaimed expenses in construction. From 6 April 2026 the approved mileage rate is 55p per mile for the first 10,000 business miles in the tax year, and 25p per mile thereafter. To claim this you need a contemporaneous log recording date, destination, business purpose and miles for every trip. A log reconstructed from memory at the year end is unlikely to hold up in an enquiry. A GPS-based mileage app creates a timestamped record that is far more robust.
Records contractors must keep
CIS300 return copies and payment records
Keep a copy of every CIS300 monthly return filed. In a compliance check HMRC will compare your retained copies against its own records, so the copies must match what was actually submitted. Alongside each return, keep a payment record for every subcontractor showing the gross amount, the materials element excluded from the deduction base, the deduction rate, the deduction amount, and the net paid. Also keep evidence of each CIS remittance to HMRC: the electronic payment deadline is the 22nd of the month (19th by cheque), and your records need to confirm you met it.
Verification records
Before paying any subcontractor, a contractor must verify their CIS status with HMRC, which sets the deduction rate: 0% for GPS, 20% for a registered subcontractor, 30% for an unregistered one. Keep every verification record, including the subcontractor's name and UTR, the date of verification, and the verification number. From 6 April 2026 this record doubles as evidence of the due-diligence duty under Finance Act 2026: a contractor who paid without re-verifying and who ends up in a fraudulent supply chain can lose GPS without proof of intent, purely on the basis of not having checked.
Payment deduction statements (PDSs) issued
Keep a copy of every PDS you issue. HMRC may cross-check PDSs against what subcontractors declared on their own returns, and inconsistencies attract further scrutiny.
Retention periods at a glance
| Record type | Who keeps it | Statutory minimum | Safe standard | Why it matters |
|---|---|---|---|---|
| CIS deduction statements received | Subcontractor | 3 years | 6 years | Core evidence for Self Assessment and refund claims |
| CIS300 monthly returns | Contractor | 3 years | 6 years | Supports compliance checks and penalty appeals |
| Verification records | Contractor | 3 years | 6 years | Correct deduction rate evidence + April 2026 due-diligence duty |
| PDSs issued | Contractor | 3 years | 6 years | Cross-check against subcontractor Self Assessment returns |
| Expense receipts and mileage log | Subcontractor | 5 years after SA filing deadline | 6 years | Supports expense claims and refund calculations |
| Bank statements | Both | 5 years after SA filing deadline | 6 years | Corroborates income, payments and deduction amounts |
| Invoices issued | Subcontractor | 5 years after SA filing deadline | 6 years | Establishes turnover, reconciles with deduction statements |
The 3-year statutory minimum for CIS-specific records is a floor, not a target. HMRC's standard assessment window is 4 years from the end of the tax year, extending to 6 years where tax has been lost through carelessness and up to 20 years for deliberate conduct. Because the careless-conduct window reaches 6 years, and because Self Assessment records must be kept for 5 years after the 31 January filing deadline in any case, six years is the practical safe standard for all records.
MTD ITSA: digital records mandatory from April 2026
From April 2026, sole traders and partnerships with annual gross income over £50,000 must keep digital records using MTD-compatible software and file quarterly updates with HMRC. The threshold falls to £30,000 from April 2027. The full mechanics are in our guide to MTD ITSA for CIS subcontractors. The point most CIS workers miss is how income is measured for the threshold test.
MTD ITSA uses gross income before CIS deductions, not the net amount in your bank. A subcontractor who invoices £60,000 and receives £48,000 net (because 20% CIS was deducted) is tested on the £60,000 gross figure. They are in scope from April 2026 even though less than £50,000 actually landed in their account. Acting as though the net figure is the one that matters is the most common MTD planning error for CIS subcontractors.
In 2026/27, HMRC will not issue penalty points for late quarterly updates. That grace covers quarterly updates only. Late annual returns are still penalised, and late-payment penalties still apply, though the late-payment regime allows a short window (no late-payment penalty until the tax is more than 15 days overdue, with the charge rising the longer it remains unpaid) rather than biting from day one.
What HMRC looks for in a CIS compliance check
For contractors, a compliance check typically requests all verification records for the period (verification number, date, rate confirmed), copies of CIS300 returns, evidence that deductions were calculated on the labour element only rather than the full invoice, and proof that deductions reached HMRC by the 22nd. The labour-only point is frequently where adjustments are made: a contractor who applied the deduction to the full invoice value, including materials, has over-deducted and the subcontractor is due a correction.
For subcontractors, the check focuses on whether deduction statements reconcile with the gross income declared on the Self Assessment return, whether expense claims are supported by receipts and a mileage log, and whether the invoices issued match the turnover figure used. Large refund claims relative to income attract closer scrutiny of the expense receipts.
In both cases, organised records shorten the check and reduce the risk of an estimated assessment. Well-kept records give HMRC the assurance the figures add up, and the enquiry closes. Gaps in the records give HMRC room to estimate, and the estimate rarely favours the taxpayer.
If you want help putting a record-keeping system in place, checking that your records are HMRC-ready, or managing a compliance check that is already open, see the full range of what we cover on our services page.