Labour, materials, your rate — and you'll see exactly what lands in your account. Deduction applies to labour only, never materials.
Under the Construction Industry Scheme, contractors deduct money from a subcontractor's payments and pass it to HMRC as an advance on the subcontractor's tax and National Insurance. The deduction applies to the labour element only — genuine material costs, plant hire you paid for, and VAT are excluded.
The rate depends on your status with HMRC: 20% if you're registered for CIS, 30% if you're not registered or couldn't be verified, and 0% if you hold gross payment status. On the maths above: deduction = labour × rate, and you're paid labour + materials − deduction.
New to CIS or explaining it to your crew? Read our plain-English guide — Get your UTR → What you can claim → How to invoice → CIS explained: why 20% leaves your pay, and how to get it back — also available in Română, Polski, Български, Українська, Español and Português.
No. CIS applies to labour only. Genuine material costs — supplied at cost, with receipts — are paid in full. That's why splitting labour and materials on your invoice matters.
30% applies when you're not CIS-registered, or the contractor couldn't verify you with HMRC. Registering brings it to 20%. A mismatched name or UTR at verification is a common cause — check what details the contractor used.
On amounts excluding VAT. On most construction-to-construction invoices VAT isn't charged anyway — the domestic reverse charge means the customer accounts for it.
It's an advance on your tax, not a cost. Sole traders reconcile through Self Assessment — overpaid amounts come back as a refund. Limited companies offset against PAYE or claim after year end.
HMRC pays-you-in-full status: no deductions, you settle your own tax. You qualify by passing turnover, business and compliance tests — at least £30,000 turnover for a sole trader.
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