View and send a payment and deduction statement

This article explains how to create and send a payment and deduction statement for one of your subcontractor contacts in FreeAgent when you are a contractor operating the Construction Industry Scheme (CIS) to deduct tax from your subcontractors' bills.

A payment and deduction statement is the document which proves how much Income Tax has been deducted under the CIS by the contractor. 

When a contractor deducts the Income Tax under the CIS, they must provide the subcontractor with a CIS payment and deduction statement. This is the written evidence which the subcontractor can use to prove any tax deductions with HMRC. 

1. Navigate to the relevant subcontractor contact

Navigate to the 'Contacts' tab at the top of the screen.

Select the relevant subcontractor contact and select the 'CIS Payments & Deductions’ tab.

Please note that if you don't submit payroll to HMRC, you'll see a notice to add your PAYE reference to be included in the statement. If your business or company is not registered as an employer, you won't have a PAYE reference and you won't need to enter this reference.

2. Select the relevant reporting period

The statement will default to the most recent tax month but you can select the relevant tax year and monthly reporting period from the drop-down menus.

You can also view an annual payment and deduction statement for the contractor by selecting ‘Annual statement’ from the bottom of the month drop-down menu.

The statement will display all CIS bills that were paid to the subcontractor within the return period and the amount of CIS deducted. If a bill is partially paid, the amount of CIS shown will be based on the proportion of the bill that has been paid.

Please note that the bill amounts on the statement are exclusive of VAT. This is because HMRC requires them to be shown exclusive of VAT for this purpose. 

Gross paid (A)

The gross paid amount is the sum (or proportion, if the bill also contains non-CIS items) of the CIS items on the bill that was paid to the subcontractor.

Cost of materials

The cost of materials for each subcontractor is the sum of ‘CIS materials’ (code 099) items (that is, line items allocated to accounting category 099 in FreeAgent) on bills that were paid to them during the reporting period. These are separated out because you do not have to deduct income tax on the cost of materials under the CIS.

Liable for deduction

The amount liable for deduction for each subcontractor is the sum or proportion of the items subject to tax deductions under CIS items on bills that were paid to them during the reporting period (excluding amounts recorded as ‘CIS materials’).

Deducted (B)

The deducted amount for each bill is the sum (or proportion, if the bill also contains non-CIS items) of the CIS deductions on the CIS bill that was paid to the subcontractor.

Payable (A-B)

The payable amount for each bill is the amount that was paid to the contractor (excluding VAT). This will equal the ‘Gross paid (A)’ amount minus the ‘Deduction (B)’ amount.

3. Save or send the statement

You can either save your statement as a PDF to print out and send by email outside of FreeAgent, or you can send this directly to your subcontractor from FreeAgent.

Save the statement

To save the statement, select ‘Save as PDF’.

Send the statement

To send the payment and deduction statement to the subcontractor from FreeAgent, select ‘Send by email’.

Enter the relevant details in the ‘From’, ‘To’, ‘Subject’ and ‘Content’ fields. Alternatively, you can set up an email template for CIS payment and deduction statements to populate this information automatically.

You can also use the 'Email tags' listed on the right to build the content.

Below the email template, you can view a preview of the statement so that you can double-check it before you send it.

Once you're happy with the statement and the email, select ‘Send Email’ to send it to your subcontractor.

Viewing the email history

Below the payment and deduction statement you'll find a history of all the emails FreeAgent has sent in relation to this statement, along with their status. The status will either be ‘Sent’, ‘Bounced’, ‘Blocked’ or ‘Delivered’.

This can help you identify whether the subcontractor has received the statement or whether the subcontractor's email server has blocked it.

You’ll also receive a notification if your email has bounced or been blocked so you can try sending it again.