CIS labour and materials: what the deduction is taken from
The CIS deduction is not taken from the whole invoice. Here is what comes off first, what stays in, and the evidence to ask for.
The order of the sum
Start with the total (gross) amount of the subcontractor's invoice. Take away what the subcontractor paid for:
- VAT
- equipment which is now unusable (consumable stores)
- fuel used, except for travelling
- equipment hired for this job (plant hire)
- manufacturing or prefabricating materials
- materials, only if they paid for them directly
Then take the CIS deduction from what is left, at the rate HMRC gave you when you verified them: 20% if registered, 30% if not, 0% with gross payment status. Source: What you must do as a CIS contractor: make deductions and pay subcontractors.
An example
Our own made up figures, to show the order. A registered subcontractor, not VAT registered, invoices £1,500: £1,000 for their work and £500 for materials they bought for the job. Take the £500 off, then 20% of the £1,000 left, which is £200. You pay the subcontractor £1,300 and pay the £200 to HMRC.
What stays in
Travelling expenses, including fuel for travel, and subsistence paid to or for the subcontractor stay in the amount the deduction is taken from. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340).
Materials: only what they paid for directly
Materials come off only where the subcontractor paid for them directly to carry out that contract. Plant counts only where the subcontractor hired it from someone else; plant they own does not, though fuel for it, other than for travel, can. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340).
If the subcontractor is VAT registered, leave VAT out of the materials figure. If they are not, the VAT they paid on the materials is part of the cost. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340).
Ask for the evidence
You can ask the subcontractor for evidence, for example receipts, that they paid for materials directly. If they have none, estimate the cost of the materials. Source: What you must do as a CIS contractor: make deductions and pay subcontractors.
If the materials figure looks excessive, HMRC may recover any under deduction from you, the contractor. The same goes for plant hire you did not check. Source: Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340). Our suggestion: keep the receipts, or a note of how you estimated, with that month's records.
VAT on the same invoice
If you and the subcontractor are both VAT registered, the VAT domestic reverse charge must be used for most building and construction services reported within CIS. Check GOV.UK's guide before you pay. Source: Check when you must use the VAT domestic reverse charge for building and construction services.
Pay the deductions to HMRC each month, by the 22nd if you pay electronically or the 19th by post. Source: What you must do as a CIS contractor: pay deductions to HMRC.
Questions people ask
Is CIS deducted from materials?
Not from materials the subcontractor paid for directly for the job. Those come off the invoice first, and the deduction is taken from what is left.
Are travel costs taken off before the CIS deduction?
No. Travelling expenses, including fuel for travel, and subsistence stay in the amount the deduction is taken from.
What if the subcontractor has no receipts for materials?
GOV.UK says you can ask for evidence such as receipts, and if they have none, estimate the cost of the materials. If the materials look excessive, HMRC may recover any under deduction from the contractor.
Read on GOV.UK on 28 October 2026. If GOV.UK changes, we change this page.
More guides
- The CIS payment and deduction statementThe deadline, what it must show, and a plain layout to copy.
- CIS nil returns since April 2026What to do in a month you paid no subcontractors.
- CIS penalties for contractorsLate returns, records, statements and the April 2026 fraud rules.
- How to check a subcontractor's CIS statusVerify with HMRC, check the company, keep a dated record.
Wherever you build: CIS checks across the UK.