Your Contractor Deducted the Tax. They Just Didn't Give It to HMRC.
When a contractor takes 20% from your pay but fails to report it, HMRC has no record of the deduction. Come January, they'll ask you to pay it again — and proving you already paid it falls entirely on you.
You've done the job. The invoice went out for £10,000. Your contractor paid £8,000 — the 20% CIS deduction held back, ready to be passed to HMRC on your behalf. That's how the scheme is supposed to work.
But if the contractor doesn't file their monthly CIS return, or files it incorrectly, HMRC sees something different: a subcontractor who earned £10,000 and paid zero tax. Your Self Assessment arrives in January. HMRC asks for £2,000. And the £2,000 that was already taken from your pay — the money sitting in your contractor's account, or spent — is your problem to prove.
How the Double-Tax Problem Works
£10,000 invoice · 20% CIS rate · contractor fails to file monthly return
Contractors are legally required to provide a Payment and Deduction Statement (PDS) for every tax month in which a deduction is made, and to file their CIS return with HMRC by the 19th of the following month. Failure to do so is a compliance breach — and HMRC can penalise the contractor. But it does not automatically restore your missing credit. That is a separate process you must initiate yourself.
Why This Happens More Than You Think
Some contractors fail to file returns through genuine disorganisation — late bookkeeping, staff turnover, software problems. Others do it deliberately, knowing the cash-flow benefit of holding onto deducted funds. In either case, the subcontractor carries the risk.
The most common situations where missing deductions surface:
Tomasz works a full month for a contractor. Invoice total: £10,000. He's paid £8,000 — the contractor tells him the £2,000 CIS deduction has been passed to HMRC.
In January, Tomasz files his Self Assessment expecting a small refund. Instead, HMRC shows £0 in CIS credits for that month. His assessment shows £2,000 owed — the same £2,000 that was already taken from his pay.
Tomasz has his bank statement showing he received £8,000, not £10,000. But without a PDS or HMRC record of the deduction, he faces months of correspondence to recover a credit he was already entitled to — and must still pay if HMRC doesn't accept his evidence in time.
Three Steps to Recover Your Missing Credits
HMRC places the burden of proof on you, not the contractor. Before making any calls or sending any letters, gather: bank statements showing every net payment received (which prove a deduction was made), all invoices you issued in the relevant period, and any PDS statements you did receive. The difference between your gross invoice and the net payment in your bank is your primary evidence that a deduction occurred.
A phone call won't create a paper trail. Send an email and follow it with a letter sent via recorded delivery. Be direct and use language that signals you know your rights. "Please provide Payment and Deduction Statements for the following months: [list]. These are a legal requirement under the Construction Industry Scheme. I require them within 14 days to reconcile my tax position with HMRC. Failure to provide them will result in a report to HMRC's CIS Compliance team."
If the contractor does not respond within 14 days, contact HMRC's CIS helpline on 0300 200 3210. Report the missing returns and submit your bank evidence. HMRC can investigate the contractor's filing record and, in some cases, apply the credit to your account based on your evidence alone — but this process takes time. Do not wait until January to start it. The earlier you report, the more likely the credit is resolved before your Self Assessment is due.
When to Act — the Window That Matters
Protect Yourself Going Forward
The best defence against missing deductions is a system that catches the problem immediately rather than in January. After every payment received, take two minutes to:
- Check that the net payment in your bank matches your invoice minus the expected CIS deduction.
- Log in to your HMRC Personal Tax Account (gov.uk) monthly and confirm the CIS credits are appearing. Any gap is a flag to investigate immediately.
- Request your PDS in writing if it hasn't arrived within a week of payment — don't wait and don't assume it's coming.
- Keep a simple log: date, contractor, gross invoice, net received, PDS received (yes/no). Three columns. It takes five minutes a month and is your entire defence if a dispute arises.
Missing deductions on your HMRC account?
If your Personal Tax Account shows gaps in CIS credits that don't match your records, the time to act is now — not in January when the bill arrives. We specialise in reconciling missing CIS credits and dealing with HMRC on your behalf.
Book a CIS Audit Review →Frequently Asked Questions
Missing CIS deductions · contractor negligence · HMRC 2026
What is a Payment and Deduction Statement and am I entitled to one?
A Payment and Deduction Statement (PDS) is a document your contractor must provide for every tax month in which they make a CIS deduction from your pay. It shows the gross payment, the amount deducted, and the net amount paid to you. You are legally entitled to receive it. Without it, you cannot reconcile your CIS credits with HMRC and may struggle to claim your refund or defend against a tax demand. If your contractor is not providing PDS statements, request them in writing immediately.
What can I do if my contractor deducted CIS but didn't pass it to HMRC?
First, gather your evidence: bank statements showing net payments received, your invoices, and any PDS documents. Then send the contractor a formal written request for missing statements with a 14-day deadline. If they do not respond, contact HMRC's CIS helpline on 0300 200 3210 to report the non-compliance and submit your bank evidence directly. HMRC can investigate the contractor's filing record and apply credits to your account based on your evidence. Do not wait until January — the earlier you report, the better your chance of having the credits resolved before your Self Assessment is due.
How do I check if my CIS deductions have been recorded by HMRC?
Log in to your HMRC Personal Tax Account at gov.uk. Under your Self Assessment or CIS section, you can view the deductions that have been reported against your UTR for the current and previous tax years. Check this monthly — don't wait until January. If a month shows £0 in CIS credits but you know a deduction was made, contact the contractor immediately and follow up with HMRC if you receive no response within 14 days.
Can I reclaim CIS deductions that went missing in a previous tax year?
Yes — you can submit an overpayment relief claim or amend your Self Assessment return going back up to four tax years. You will need evidence that the deduction was made (bank statements showing net payments, invoices, any PDS documents). A CIS-specialist accountant can reconstruct the missing credits from your records, identify the correct amounts, and submit the claim to HMRC on your behalf. The older the year, the more important it is to have organised records — HMRC will scrutinise older claims more carefully.
Is it fraud if a contractor deducts CIS but doesn't pay it to HMRC?
Deliberately withholding CIS deductions that have been taken from a subcontractor's pay and not passing them to HMRC is a serious compliance breach — and in cases of deliberate non-payment, it can constitute fraud. HMRC takes CIS non-compliance seriously and has the power to issue penalty notices, conduct investigations, and pursue recovery from the contractor. If you believe a contractor is deliberately withholding your deductions rather than simply failing to file on time, you can report it to HMRC's fraud hotline (0800 788 887) in addition to the standard CIS helpline. This does not resolve your credit directly, but it triggers a more urgent HMRC investigation.