What counts as materials under CIS?
Under the Construction Industry Scheme, the contractor deducts tax from your labour, not from the materials you paid for. Getting the split right on your invoice can make a real difference to your cash flow. Here's what HMRC treats as materials, what it doesn't, and how to show it.
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Why the split matters
When a contractor pays you under CIS, they deduct 20% (or 30% if you're not registered) from the part of the payment that isn't for materials. If you don't show materials separately, the contractor may deduct from the whole amount. You'd get the extra back eventually through Self Assessment, but that can be many months away.
Take a £2,000 invoice that includes £600 of materials you bought. Deducting 20% from the whole £2,000 takes £400. Deducting from the £1,400 of labour only takes £280. That's £120 more paid to you now, on one invoice.
What HMRC treats as materials
HMRC's CIS guidance (CIS 340) says the deduction isn't applied to the direct cost of materials the subcontractor buys for the job. In practice that includes:
- Materials built into the work, such as timber, plasterboard, cable, pipe, blocks, adhesives and fixings that you bought for that job.
- Consumable stores used up in the work, like sanding discs, blades, sealant and cutting fluid.
- Plant hire: the cost of hiring plant to do the job, such as a mini digger or scaffold tower.
- Fuel for plant, such as diesel for a hired excavator. Fuel for travelling to and from site doesn't count.
- Manufacturing or prefabrication of materials, where you make something off site that's then fitted.
The figure to use is what you actually paid, excluding any VAT you can reclaim. If you're not VAT registered, use the full price you paid.
What doesn't count
- Travel costs, including van fuel, parking, tolls and public transport to site.
- Food, drink and accommodation while working away.
- Your own labour or your workers' wages. These are labour, however you describe them.
- Any markup you add to materials. Only the cost is excluded from the deduction; profit on top of the cost is treated like labour.
- Materials the contractor supplied. You didn't pay for them, so there's nothing to exclude.
Tools are a grey area. Tools you keep and use across many jobs are your business equipment rather than materials for one job. If you're unsure, ask the contractor how they treat them before you invoice, and keep receipts either way.
Worked example: a week with materials
Tom is a CIS-registered carpenter. This week he worked five days at £220 and bought £385 of timber and fixings (plus VAT, but he isn't VAT registered, so he paid £462 in total and that's his cost). He also hired a mitre saw stand for £36 and filled his van with £70 of diesel.
| Line | Amount | Counts as materials? |
|---|---|---|
| Labour: 5 days at £220 | £1,100.00 | No |
| Timber and fixings (receipts attached) | £462.00 | Yes |
| Hire of saw stand | £36.00 | Yes (plant hire) |
| Van diesel | £70.00 | No (travel) |
| Gross | £1,668.00 |
The deduction base is everything except materials: £1,100 + £70 = £1,170. At 20%, the deduction is £234.00, so Tom should be paid £1,668.00 − £234.00 = £1,434.00. If the contractor had deducted from the full £1,668, he'd have lost £333.60 instead, £99.60 more.
How to show materials on your invoice
- Put materials on separate lines from labour, with a clear description.
- Show the cost price, not a marked-up figure, if you want it excluded from the deduction.
- Keep receipts. The contractor may ask for them, and HMRC can check that the materials figure is genuine.
- Show a CIS summary: labour, materials, the expected deduction, and the amount payable. See our CIS invoice guide for a full layout.
If you're VAT registered
Use the materials cost without VAT, because you reclaim that VAT separately. The CIS deduction is never taken from VAT. If the job is under the domestic reverse charge, you won't charge VAT on the invoice at all, but the materials split still matters for CIS.
If the contractor ignores your split
Check the monthly payment and deduction statement. It should show the gross amount, the materials cost and the deduction. If the materials figure is missing or wrong, ask the contractor to correct it and send your receipts. If it isn't fixed, the extra deduction still counts towards your tax bill, and you can claim back any overpayment through Self Assessment.
This is general information, not tax advice. Check HMRC's CIS 340 guidance or speak to an accountant about your situation.
Materials checklist before you invoice
- Did you buy it specifically for this job? If so, it's likely materials.
- Was it used up or built into the work, or hired plant for the work? Materials.
- Is it travel, food or accommodation? Not materials.
- Is the figure your cost, without reclaimable VAT and without markup?
- Do you have the receipt filed with the invoice?
Running through this list each week takes a minute and avoids most disputes over the deduction.
See also: how to invoice for materials as a subcontractor for the invoice layout, and the CIS calculator to check the deduction.
Frequently asked questions
Is CIS deducted from materials?
No. The deduction is taken from labour and other non-materials costs, not from the direct cost of materials you bought for the job.
Does van fuel count as materials under CIS?
No. Fuel for travelling to and from site is a travel cost. Only fuel for plant used in the work counts.
Should I show materials with or without VAT?
Use the cost excluding any VAT you can reclaim. If you're not VAT registered, use the full amount you paid.
Can I add a markup to materials?
You can charge one, but only the actual cost is excluded from the deduction. The markup is treated like labour.
Sources
This guide is general information, not legal, tax or financial advice. Rules and rates change, so check the linked GOV.UK pages for the current position.