A mid-year CIS statement check for the second MTD update

CIS statements follow tax months, while the second MTD update is cumulative from the start of the reporting year. A mid-year check should match the actual statement due dates and identify missing deductions without assuming that every recent month is already overdue.

Match the month to its statement deadline

Where deductions are made, the contractor must provide the statement within 14 days after the tax month ends. HMRC explains the requirement.

For example, on 10 September a month-five statement is not yet late merely because that tax month has ended. Request missing overdue statements while allowing for the actual deadline.

Review cumulative income and deductions

The standard second update covers 6 April to 5 October, not just July onwards. Reconcile gross payments, materials, CIS deductions and net receipts across the year-to-date record. Correct earlier errors in the underlying records through the supported process.

Keep deduction evidence for the annual tax-credit review. A contractor statement supports the deduction history; it is not a substitute for the rest of the business records.

Worked example: a missing month-four statement

In early September, a subcontractor has an August bank receipt but no statement for the tax month ending 5 August. The normal 19 August statement deadline has passed, so they request a replacement from the contractor.

They separately note that the month ending 5 September has a 19 September deadline. Treating both as equally late would create an unnecessary dispute.

Reconcile receipts, not just bank payouts

A bank deposit is not always the original sale. A platform, card processor or agent may deduct fees before sending you the balance. Keep the statement showing the gross amount, deductions, refunds and final payout, then explain the difference in your records.

Cash needs the same attention. Record customer cash when received under the cash basis, even if some of it is spent before the rest reaches the bank. Banking cash already recorded as a sale is a transfer between your cash and bank records, not another sale.

HMRC's record-keeping guidance covers income and business expenses. The useful practical test is whether another person could follow a payment from the original sale to the amount received without counting it twice.

Do not use bank feeds as a reason to ignore payment accounts, credit cards, cash or payments made personally for the business. List every place where business money passes, choose the source for each type of transaction and review transfers between those sources. This turns reconciliation into a repeatable check rather than a search through several unrelated statements.

Keep the evidence connected to the figures

Your digital record should explain the amount, date and nature of the transaction. Keep the invoice, receipt, statement or other evidence that supports it. A photograph can make a paper document easier to retain, but a folder of photographs alone does not create complete transaction records.

For sole traders, HMRC normally requires business records to be kept for at least five years after the relevant 31 January filing deadline. Keep them longer where the rules for a late return, enquiry or other circumstances require it. Check the record-retention guidance.

Make the records usable by your future self. Include a short explanation where a bank description is vague, retain the calculation behind a business-use split and make corrections traceable. For a missing receipt, try the supplier account, email confirmation or a replacement invoice before relying on incomplete evidence.

At review time, compare your records with the bank or payment account and investigate differences. Equal totals are useful, but two errors can cancel each other out. A sample of individual transactions can reveal a duplicated purchase or an omitted customer receipt that a totals-only check misses.

Where this fits into Making Tax Digital

For 2026/27, the first mandatory phase generally covers individuals whose combined qualifying self-employment and property income was more than £50,000 in 2024/25, subject to exemptions. Qualifying income normally means income before expenses. It is a different figure from taxable profit. Check the qualifying-income rules.

Once within MTD, keep the required digital records and send quarterly summaries for each relevant business. The summaries are cumulative from the start of the reporting year. They do not contain your entire personal tax position, and sending one does not itself create a quarterly tax-payment demand.

HMRC does not require accounting or tax adjustments before each quarterly update. Those adjustments and the other information needed for the annual return still have to be completed at the appropriate stage. Keep a review list so a matter deferred until year end is not forgotten. Read HMRC's quarterly-update guidance.

Software can organise the information, but the business facts remain essential. Review the figures you approve rather than assuming that a successful import has also settled every tax question.

Keep the schedule current

Record each contractor, tax month, gross payment, deduction and receipt. Investigate differences promptly and retain the answer. The second reporting period began in July, so an August or September review should be described as mid-period work rather than preparation before Quarter Two begins.

Take the next step

Avona.app offers a self-service route from £15/month. Bring your records together, review the figures and choose a workflow that fits your business. For professional help, discuss the scope and total price of Avona Concierge, managed by chartered accountants, before choosing a service.

Related guides

• CIS subcontractors: checking deduction statements before an MTD update
• MTD reporting periods: standard tax quarters and calendar quarters