CIS deductions on invoices: a subcontractor’s guide

If you work as a subcontractor under the Construction Industry Scheme (CIS), your contractor takes a deduction from your labour before they pay you and sends it to HMRC on your behalf. It’s not an extra cost — it’s an advance payment toward your tax and National Insurance — but it does change what your invoice needs to show.

What rate is deducted

• 20% — the standard rate, for subcontractors registered under CIS.
• 30% — for subcontractors who aren’t registered (or can’t be verified).
• 0% — for those with gross payment status.

What the deduction is taken from

CIS is deducted from the labour element only — not from materials, plant hire you’re charging on, or VAT. So a clean invoice separates labour from materials, applies the deduction to labour, and shows the customer exactly what’s being withheld and paid over to HMRC.

A worked example

• Labour £1,000, materials £400 → net £1,400.
• CIS at 20% is taken from the £1,000 labour = £200 deducted.
• You’re paid £1,200 now; the £200 goes to HMRC against your tax bill.

Where it gets fiddly

CIS often sits alongside the VAT domestic reverse charge on the same invoice, which is where hand-calculations go wrong. Getting the order right — VAT treatment, then CIS on labour, then any retention — matters if you don’t want your accountant chasing you.

How software handles it

In Worksum you set the subcontractor’s CIS rate once, split labour and materials on the job, and the invoice applies the deduction automatically — correctly layered with reverse-charge VAT and retention. You get a compliant breakdown without touching a calculator. This isn’t tax advice — check your position with your accountant or HMRC — but the arithmetic is exactly what your job system should be doing for you.