CIS cheat sheet for subcontractors (free one-page PDF)

The three CIS deduction rates

The deductions are advance payments towards your tax and National Insurance bill, not an extra tax. Give each contractor the exact UTR and the legal business or trading name you registered with, because they use them to verify you. See what a CIS verification is.

What the deduction is taken from

The contractor starts with the total (gross) amount of your invoice and takes away what you paid for yourself, then applies the rate to what's left. GOV.UK lists VAT, consumable stores, fuel used (except for travelling), plant hired for the job, manufacturing or prefabricating materials, and materials you paid for directly. The contractor can ask for receipts, and if you can't show any they estimate the materials cost.

Example: labour £1,000, materials £300 and VAT £260 make an invoice of £1,560. The 20% deduction is worked on the £1,000 labour, so £200, and you receive £1,360. Check your own figures with the CIS calculator.

Gross payment status: the tests

To qualify you must show HMRC that:

• you've paid your tax and National Insurance on time in the past
• your business does construction work (or provides labour for it) in the UK
• your business is run through a bank account

HMRC also looks at your turnover for the last 12 months, ignoring VAT and the cost of materials. It must be at least £30,000 if you're a sole trader; £30,000 for each partner in a partnership, or £100,000 for the whole partnership; or £30,000 for each director of a company, or £100,000 for the whole company. HMRC reviews gross payment status every year. See CIS gross payment status.

The monthly dates

• A CIS tax month runs from the 6th of one month to the 5th of the next.
• Your contractor files a monthly return by the 19th. You don't file one as a subcontractor.
• They must give you a payment and deduction statement within 14 days of the end of the tax month, so by the 19th. For the month ending 5 November, that's 19 November.
• Contractors pay the deductions to HMRC by the 22nd (or the 19th if paying by post).

More on this in the CIS monthly return explained.

Check every payment and deduction statement

1. Check your name and UTR, and the contractor's name and tax reference, are right.
2. Check the gross payment matches the invoices you sent for that tax month.
3. Check the materials figure matches your invoices.
4. Check the deduction is the right percentage of gross minus materials.

If a statement is missing or wrong, ask the contractor. If you've lost one, ask for a replacement. If you can't get your statements, for example because the contractor has gone out of business, GOV.UK says to write to HMRC with your name, address and UTR, the contractor's details, the payment dates and why you don't have them. Our statement guide and the statement template help you check them.

Claiming deductions back

Sole traders and partners put their pay before deductions as income, and the total deductions as "CIS deductions", on their Self Assessment return. HMRC takes the deductions off the tax you owe and refunds any overpayment. Any balance is due by 31 January. Limited companies use their payroll: they send an Employer Payment Summary with the year-to-date deductions and don't use the Corporation Tax return. See claiming back CIS deductions and the CIS refund calculator.

Records to keep

• Every monthly payment and deduction statement, because HMRC may ask for evidence of your deductions.
• Your invoices and your materials receipts.
• If you're self-employed, GOV.UK says to keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.

See CIS paperwork for subcontractors and the free CIS invoice template.

This is general information, not tax advice. Rules and thresholds change, so check the GOV.UK pages linked below before relying on them.