What Records Should Subcontractors Keep?

If you work in construction under the CIS scheme, keeping accurate paperwork is essential. One of the most common questions we hear is: What records should subcontractors keep to stay compliant and avoid HMRC penalties?

Whether you’re a sole trader, subcontractor, or operating through a limited company, keeping the right records protects your business, ensures you claim the correct tax deductions, and helps you stay on the right side of HMRC.

In this guide, we break down exactly what records you need, how long to keep them, and how digital bookkeeping makes the process easier.

Why It’s So Important to Keep Proper Records as a Subcontractor

Under UK tax law, subcontractors are required to maintain accurate financial records. If HMRC investigates your accounts and your paperwork is incomplete or inaccurate, you could face:

• Fines and penalties
• Incorrect tax assessments
• Delays in tax repayments
• CIS deduction disputes
• Cash flow issues

Good record-keeping also gives you clarity. You’ll know exactly what you’ve earned, what’s been deducted under CIS, and what you owe or are owed at the end of the tax year.

What Records Should Subcontractors Keep?

Here’s a clear breakdown of the key documents every subcontractor should maintain.

1. CIS Payment and Deduction Statements

Under the Construction Industry Scheme (CIS), contractors must provide a monthly statement showing:

• Gross payment amount
• CIS deductions made
• Contractor’s name and UTR
• Your details and verification number

These statements are crucial because they demonstrate the amount of tax that has already been deducted at source. Without them, claiming back overpaid tax can be difficult.

Always keep every monthly CIS statement.

2. Invoices Issued to Contractors

You should retain copies of:

• All invoices you send
• Payment dates
• Invoice numbers
• VAT (if applicable)

Your invoices form the backbone of your income records and must match your bank deposits.

3. Business Expense Receipts

To reduce your tax bill legally, you must keep evidence of allowable expenses, including:

• Tools and equipment
• Protective clothing (PPE)
• Travel to job sites
• Fuel and vehicle costs
• Insurance
• Training and certifications
• Accountancy fees
• Phone and internet (business portion)

If you can’t prove an expense, HMRC may disallow it.

4. Bank Statements

Keep records of:

• Business bank statements
• Savings accounts (if used for tax reserves)
• Loan agreements

Ideally, subcontractors should operate a separate business bank account. This makes tracking income and expenses far simpler, especially under CIS.

5. Payroll Records (If You Employ Staff)

If you hire labourers or employees, you must keep:

• Payslips
• PAYE records
• Pension contributions
• National Insurance payments
• RTI submissions

Payroll mistakes can be costly, so accurate records are essential.

6. VAT Records (If VAT Registered)

If you’re VAT registered, you must retain:

• VAT invoices
• VAT returns
• Reverse charge VAT documentation
• Digital records (if using Making Tax Digital software)

Construction businesses often deal with reverse charge VAT, which adds another layer of compliance.

Suggested read: VAT Returns & Advise Without the Tax-Time Panic

7. Tax Returns and Year-End Accounts

Keep copies of:

• Self-Assessment tax returns
• Corporation tax returns (if a limited company)
• Year-end accounts
• HMRC correspondence

These documents provide a complete financial history of your subcontracting business.

How Long Should Subcontractors Keep Records?

HMRC requires you to keep records for:

• At least 5 years after the 31 January submission deadline of the relevant tax year (for Self Assessment).
• At least 6 years for limited companies.

Destroying records too early could cause serious problems if HMRC launches a compliance check.

Digital Record-Keeping for Subcontractors

Paper receipts get lost. Bank statements pile up. CIS deductions can become confusing.

That’s why many subcontractors now use cloud accounting software such as:

• QuickBooks
• Xero
• Syft
• Integrated CIS and payroll platforms

Digital bookkeeping allows you to:

• Photograph receipts instantly
• Track CIS deductions in real time.
• Reconcile bank transactions automatically.
• Generate tax-ready reports
• Avoid year-end stress

For busy tradespeople, this can save hours each month.

Common Mistakes Subcontractors Make

When reviewing subcontractor accounts, we often see:

• Missing CIS statements
• Mixing personal and business expenses
• No mileage logs
• Incorrect VAT treatment
• Late payroll submissions
• Poor expense documentation

These small issues can quickly lead to larger tax problems.

Do Sole Trader and Limited Company Subcontractors Keep Different Records?

The core records are similar, but limited companies must also keep:

• Directors’ loan account records
• Dividend documentation
• Companies House filings
• Board minutes (where applicable)

Limited company compliance is more complex, which is why specialist support is often beneficial.

How Specialist Accountants Help Subcontractors Stay Compliant

Construction accounting isn’t the same as standard small business bookkeeping. CIS deductions, reverse charge VAT, and project-based income require specialist knowledge.

At Brickbooks & Payroll Ltd, we work specifically with trades and subcontractors across the UK.

With over 15 years of experience, we provide:

• Full CIS accounting and compliance
• Digital bookkeeping using leading cloud software
• Payroll services tailored to construction
• VAT and reverse charge guidance
• Tax planning for subcontractors
• Year-end accounts and HMRC submissions

We keep everything digital and explain things clearly, no jargon, no confusion.

Final Thoughts: What Records Should Subcontractors Keep?

To summarise, subcontractors should keep:

• CIS deduction statements
• Copies of invoices
• Expense receipts
• Bank statements
• Payroll records (if employing staff)
• VAT records (if registered)
• Tax returns and year-end accounts

Accurate record-keeping protects your income, reduces your tax bill legally, and keeps HMRC satisfied.

If you’re unsure whether your records are compliant or if you want to move to a fully digital system that makes life easier, professional support can make a significant difference.

Frequently Asked Questions

What records should subcontractors keep under CIS?

Under the Construction Industry Scheme (CIS), subcontractors must keep all CIS payment and deduction statements provided by contractors. These statements show how much tax has been deducted at source and are essential when completing your Self Assessment or corporation tax return. You should also keep invoices, expense receipts, and bank statements alongside your CIS paperwork.

How long should subcontractors keep their tax records?

If you’re a sole trader subcontractor, you must keep records for at least five years after the 31 January submission deadline of the relevant tax year. Limited companies must generally keep records for six years. Keeping digital copies is perfectly acceptable as long as they are clear and accessible.

Can subcontractors keep digital records instead of paper copies?

Yes. HMRC accepts digital records, and many subcontractors now use cloud accounting software such as QuickBooks or Xero to store invoices, receipts, and CIS statements. Digital bookkeeping reduces paperwork, improves accuracy, and helps ensure compliance with Making Tax Digital requirements.

What happens if a subcontractor does not keep proper records?

If you fail to keep accurate records, HMRC may issue penalties, disallow expense claims, or estimate your tax bill higher than necessary. Missing CIS statements can also make it difficult to reclaim overpaid tax. Proper record-keeping protects you from unnecessary fines and disputes.

Do subcontractors need separate business bank accounts?

While not legally required for sole traders, having a separate business bank account is strongly recommended. It makes it much easier to track income, expenses, and CIS deductions accurately. For limited companies, a separate business bank account is mandatory.

Need Help with CIS, Payroll, or Bookkeeping?

Brickbooks & Payroll Ltd specialises in subcontractor accounting across the UK. We provide practical, clear, and fully digital support designed specifically for trades and construction professionals.

Book your free consultation with us today, or call us on 01234 413751 or email info@brickbooksandpayroll.com to discuss how we can help you stay compliant and in control of your finances.