Construction Industry Scheme
UK CIS Deduction Calculator
Work out how much CIS should be deducted from a subcontractor payment and how much the subcontractor should actually receive.
Calculate a CIS deduction
Enter the CIS-liable amount, direct materials cost, payment status and VAT treatment.
For a subcontractor who is not VAT registered, qualifying direct material cost can include VAT they actually paid on those materials.
Based on current HMRC CIS guidance. Rules checked 11 September 2026. Check GOV.UK.
Amount payable to the subcontractor
£1,250.00 amount due before CIS − £200.00 CIS = £1,050.00
- Labour / CIS-liable amount
- £1,000.00
- Direct materials excluded
- £250.00
- Invoice subtotal, ex VAT
- £1,250.00
- VAT charged
- £0.00
- Total invoice value payable before CIS
- £1,250.00
- CIS deduction base
- £1,000.00
- CIS deduction (20%)
- −£200.00
- Amount actually payable
- £1,050.00
How this was calculated
CIS is applied to the £1000.00 CIS-liable amount, after the direct materials figure and any VAT charged have been kept outside the deduction base.
How CIS deductions are calculated
Under the Construction Industry Scheme, a contractor may need to deduct money from a subcontractor payment and pass it to HMRC. The deduction is an advance payment towards the subcontractor’s tax and National Insurance — it is not simply an extra charge added to the invoice.
HMRC’s current method starts with the subcontractor’s total payment, excludes VAT, then takes away qualifying costs the subcontractor actually paid for before applying the CIS percentage. The most common exclusion is the direct cost of materials the subcontractor bought for that specific contract.
20%, 30% or gross payment status
20% is the normal deduction rate for a registered subcontractor. 30% applies to an unregistered or unverified subcontractor. 0% applies when HMRC confirms gross payment status. Contractors should verify the subcontractor and use the rate HMRC provides rather than guessing from what appears on an invoice.
Official source: GOV.UK — Make deductions and pay subcontractors. Checked 11 September 2026.
How materials affect CIS
CIS is not deducted from the qualifying direct cost of materials the subcontractor paid for themselves for the contract. The important word is cost: HMRC can ask for evidence and the contractor must make sure the amount is not overstated.
Other costs HMRC lists as potentially removable before the deduction include consumable stores, non-travel fuel, plant hire and the cost of manufacturing or prefabricating materials. Travel, travelling fuel and subsistence do not reduce the CIS deduction base.
If the subcontractor is VAT registered, use the VAT-exclusive direct material cost. If they are not VAT registered, VAT they actually paid on qualifying materials can be included in that direct cost.
How VAT and CIS interact
VAT charged by a VAT-registered subcontractor is excluded before calculating CIS. That means the CIS percentage is not applied to the VAT itself.
For qualifying construction supplies under the VAT domestic reverse charge, the subcontractor does not collect the VAT from the contractor. Instead, the customer accounts for it. The calculator therefore shows the reverse-charge VAT amount but does not add it to the cash payable to the subcontractor.
The reverse charge does not automatically apply to every construction invoice. The VAT registration, CIS reporting, type of supply and end-user/intermediary rules all matter.
See GOV.UK — VAT domestic reverse charge for building and construction services.
Who CIS applies to
Businesses generally need to register as CIS contractors if they pay subcontractors for construction work. A business outside construction can also become a deemed contractor if its construction spending meets HMRC’s current threshold. Subcontractors include sole traders, limited companies and partnerships carrying out construction work for a contractor.
CIS does not replace the rules that distinguish employment from self-employment. An employee should not simply be treated as a CIS subcontractor because they work on a construction site.
For the official scope, see GOV.UK — Construction Industry Scheme.
Common CIS mistakes
VAT is excluded before the CIS deduction is worked out.
HMRC focuses on the subcontractor’s direct cost, not an unsupported or inflated materials figure.
HMRC says these remain part of the gross payment for deduction purposes.
Its conditions must be checked; end-user and other exclusions can change the treatment.
The contractor should verify the subcontractor and use the payment status HMRC returns.
Worked CIS examples
Simple reference examples showing how materials, CIS status and VAT change the cash payment.
| Example | Labour | Materials | CIS rate | VAT | CIS deducted | Payable |
|---|---|---|---|---|---|---|
| Registered, labour only | £1,000 | £0 | 20% | None | £200 | £800 |
| Registered + materials | £1,000 | £500 | 20% | None | £200 | £1,300 |
| Unverified + materials | £1,000 | £500 | 30% | None | £300 | £1,200 |
| Registered + normal 20% VAT | £1,000 | £500 | 20% | £300 | £200 | £1,600 |
| Registered + 20% reverse charge | £1,000 | £500 | 20% | £300 RC | £200 | £1,300 |
Examples assume the materials figure is a qualifying direct cost and that the selected VAT treatment is correct for the supply.
CIS calculator questions
What is the CIS deduction rate?
HMRC currently uses 20% for registered subcontractors, 30% for unregistered or unverified subcontractors, and 0% for a subcontractor with gross payment status. Contractors should use the rate HMRC gives them when they verify the subcontractor.
Is CIS deducted from materials?
Not from qualifying direct material cost. HMRC says the deduction applies after taking away materials the subcontractor paid for directly for that construction contract, along with certain other qualifying costs. The contractor can ask for evidence and must make sure the materials amount is not overstated.
Is CIS calculated before or after VAT?
CIS is calculated on the payment excluding VAT. If the subcontractor is VAT registered, qualifying material cost is also taken at its VAT-exclusive cost for the CIS calculation.
How does the VAT domestic reverse charge affect CIS?
If the reverse charge applies, the customer accounts for the VAT instead of paying that VAT to the subcontractor. The CIS deduction is still calculated from the VAT-exclusive amount after qualifying direct costs are removed.
Does travel reduce the CIS deduction?
No. HMRC's CIS 340 guide says travelling expenses, including fuel for travelling, and subsistence paid to or on behalf of the subcontractor are included in the gross payment and the amount from which the deduction is made.
Is CIS a final tax bill?
No. CIS deductions are advance payments towards the subcontractor's tax and National Insurance. How they are later claimed or offset depends on whether the subcontractor is a sole trader, partner or limited company.
Who does CIS apply to?
CIS applies to contractors paying subcontractors for construction work. A subcontractor can be a sole trader, company or partner. Employees are outside CIS and should be dealt with under employment and payroll rules instead.
Can this calculator verify a subcontractor?
No. It deliberately does not connect to HMRC or verify subcontractors. Contractors must use HMRC's CIS service and then select the rate HMRC returns.
For our calculation assumptions and primary sources, read the methodology.