Reconcile CIS deductions suffered before the employer submission

A UK limited company working as a CIS subcontractor reports deductions suffered through its employer process. HMRC directs companies to submit the relevant year-to-date deductions on an Employer Payment Summary, alongside their normal payroll reporting. Sole traders and partners use a different route, so confirm the entity before following this workflow.

Collect the payment and deduction statements received from contractors. Assign each statement to the company, contractor, payment date, and tax period. A reduced bank receipt is a reason to investigate; it does not, by itself, establish the amount or identity of a CIS deduction.

Match the contractor's gross payment, stated deduction, and net payment to the invoices and cash receipt. Keep other adjustments, such as retention or agreed credits, separate. If the bank receipt is lower than expected, ask for the deduction statement rather than treating the entire shortfall as tax withheld.

For illustration, assume a contractor's statement identifies a £1,500 CIS deduction and the company can trace the corresponding net receipt. The records should preserve that £1,500 as a deduction suffered for review. It should not vanish into a customer discount or an unexplained difference when the receipt is matched.

Maintain a missing-statement list with the contractor contact and follow-up date. Ask the accountant how an unresolved item should be handled for reporting. Never manufacture a statement amount merely to force the customer balance to close.

The EPS uses the cumulative deductions suffered in the tax year. Reconcile the new total to the previously reported total plus supported changes. Entering only the current month's figure can produce a different result from the intended cumulative submission.

HMRC's Basic PAYE Tools guidance specifically distinguishes deductions suffered by the company from deductions it makes from its own subcontractors. A company operating on both sides of CIS needs separate schedules. Name the two balances clearly in the ledger and reporting checklist so they cannot be interchanged during payroll preparation.

HMRC explains that companies offset deductions suffered against PAYE liabilities, with unused amounts carried forward within the same tax year. Keep a running reconciliation of deductions reported, credits used, payments made, and the balance remaining. This review should explain both the EPS total and the amount the company still needs to pay.

Compare the internal schedule with the employer account after submissions have been processed. If a credit is missing, retain the submission evidence and identify the affected period before asking the payroll provider or HMRC to investigate. Repeatedly increasing the next submission without explaining the original mismatch can compound the problem.

Do not claim CIS deductions by directly offsetting them on the Corporation Tax return. HMRC provides a separate limited-company refund process and checks outstanding liabilities and required submissions. Review the current process with the adviser, especially if the company also acts as a contractor or has ceased trading.

Preserve the final statement register, cumulative EPS evidence, credits already used, and remaining claim calculation together. The year-end request should explain the balance being claimed without counting the same deduction again after it has already reduced an employer payment.