CIS & construction
The Construction Industry Scheme explained for subcontractors: deductions, invoices, statements and VAT reverse charge.
CIS in brief
Under the Construction Industry Scheme, contractors deduct money from subcontractors' payments and pass it to HMRC as an advance towards the subcontractor's tax and National Insurance. The deduction is 20% if you're registered for CIS, 30% if you're not, and nothing if you have gross payment status. It only applies to the labour part of a payment, not to materials you've bought for the job.
What it means for your invoices
Show labour and materials separately, so the contractor can work out the deduction correctly. Many subcontractors also show the expected CIS deduction and the net amount due. Each month the contractor should give you a payment and deduction statement. Keep these, because they show what you've already paid towards your tax bill. Sole traders claim the deductions back through their Self Assessment return.
If you're VAT-registered, the domestic reverse charge usually applies to CIS work between VAT-registered businesses. That means your invoice shows the VAT, but the contractor accounts for it instead of paying it to you.
General information, not tax advice. Check the current rules on GOV.UK.
Questions
Is CIS taken off materials?
No. The deduction only applies to labour. Materials the subcontractor bought for the job are not subject to it, so list them separately.
What's the CIS deduction rate?
20% for registered subcontractors, 30% for unregistered ones, and 0% with gross payment status.
How do I get CIS deductions back?
Sole traders include them in their Self Assessment return. Limited companies offset them through their payroll (PAYE) submissions to HMRC.