Work out the right Construction Industry Scheme deduction on a subcontractor payment. It applies the correct rate (20%, 30% or 0%) to the labour only, keeps materials out of it, and shows exactly what to pay the subcontractor and what to send HMRC.
Figures are net of VAT. VAT is handled separately, and most construction work now falls under the VAT domestic reverse charge.
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Under the Construction Industry Scheme (CIS), a contractor must take a deduction from most payments to a subcontractor and pass it to HMRC as an advance on the subcontractor's tax and National Insurance. It applies to construction work in the UK between a contractor and a subcontractor.
The deduction is calculated on the labour element of the invoice. You do not deduct CIS from the cost of materials the subcontractor genuinely paid for, nor from VAT, and there are further exclusions such as plant hire the subcontractor owns and CITB levy. So on a £1,600 invoice made up of £1,200 labour and £400 materials, a 20% deduction is £240 (20% of £1,200), and the subcontractor is paid £1,360.
You pay the deducted amount to HMRC by the 22nd of the following tax month if paying electronically (the 19th by post), and file a monthly CIS return. Give the subcontractor a payment and deduction statement within 14 days of the tax month end.
20% for a registered, verified subcontractor, 30% if they are not registered or you cannot verify them, and 0% for gross payment status. The rate applies to labour only.
No. Only the labour element is subject to CIS. You must be able to demonstrate the materials figure is genuine, otherwise HMRC can treat the whole amount as labour.
No. CIS is worked out on the labour figure before VAT. Since March 2021 most business-to-business construction supplies use the VAT domestic reverse charge, where the contractor accounts for the VAT rather than the subcontractor charging it.
No. CIS deductions are an advance payment towards your tax and National Insurance. You reclaim or offset them through your Self Assessment or, if you're a limited company, against your PAYE/CIS liabilities.
This calculator is a free tool for general guidance and is not tax advice. CIS has detailed rules and exclusions; check the current position with HMRC's CIS guidance or your accountant for your specific situation.
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