CIS for subcontractors: how the scheme works

CIS for subcontractors works by having your contractor take tax off your invoice before they pay you and send it to HMRC on your account. The rate is 20% if you’re registered for CIS, 30% if you’re not, and 0% if you hold gross payment status. It only comes off your labour, because materials, VAT, plant hire, consumable stores and non-travel fuel are taken out of the figure first. The money isn’t lost. It counts as an advance payment against your tax and National Insurance bill, and you settle up at the end of the year.

Who CIS applies to

CIS covers construction work in the UK: building, altering, repairing, extending, demolishing, and the trades that sit inside that. Groundworks, roofing, electrical, plumbing, heating, painting and decorating, scaffolding, site clearance.

You’re a subcontractor if you do construction work for another business. You’re a contractor if you pay subcontractors to do construction work for you. Plenty of people are both in the same month, and if you are, you have obligations on both sides.

You do not deal with CIS when you invoice a homeowner directly. A private domestic customer isn’t a contractor, so nothing gets deducted. That’s the single biggest source of confusion for anyone doing a mix of domestic and subcontract work: same trade, same van, completely different paperwork depending on who’s paying.

CIS is not the same thing as being self-employed, and registering for it doesn’t decide your employment status. It’s a deduction scheme sitting on top of whatever you already are.

The three rates

Registered for CIS: 20%

Not registered: 30%

Gross payment status: 0%

Registering is the cheapest ten minutes in your business. The gap between 20% and 30% is a third more of your labour money sitting with HMRC until you claim it back, and you get nothing for it. See how to register for CIS.

Your contractor doesn’t pick the rate and neither do you. They verify you with HMRC before the first payment and HMRC tells them which one to use.

What actually gets deducted

The percentage never applies to the whole invoice. Starting from the gross figure, your contractor takes off what you paid for:

VAT

materials, where you paid for them directly

consumable stores, meaning equipment now used up

plant hire for that job

manufacturing or prefabricating materials

fuel used, except fuel for travelling

Then the rate applies to what’s left, which is essentially your labour.

Two things catch people. Travel and subsistence stay in the figure and get deducted from, even though other fuel comes out. And you need evidence for materials, receipts ideally, because without it your contractor is told to estimate the cost, and their estimate will not be as generous as your receipts.

Worked example

You invoice a main contractor £6,000 plus VAT. £2,200 of that is materials you bought and have receipts for. £400 is plant hire. The remaining £3,400 is your labour.

VAT comes out. The £2,200 and the £400 come out. That leaves £3,400 liable to deduction.

Registered, at 20%, that’s £680 deducted. You get £5,320 plus the VAT, and £680 goes to HMRC with your name on it.

Not registered, at 30%, it’s £1,020. The same job, £340 worse off until you claim it back, purely because of a registration you hadn’t got round to.

And if you’d handed over no receipts and the contractor had estimated your materials at £1,200 instead of £2,200, you’d have had 20% taken off £4,400 rather than £3,400. That’s £200 of your own money gone walkabout for the sake of keeping a receipt.

The statement, and why it matters

Every time a contractor deducts from you, they owe you a payment and deduction statement within 14 days of the end of the tax month. Tax months run 6th to 5th, so for the month ending 5 June the statement is due by 19 June.

That statement is your proof. It’s what you use to claim the deductions back, and if you haven’t got them you’re reconstructing a year of deductions from bank statements in April. Chase them at the time. It’s a two-line email and it saves a genuinely miserable afternoon later.

Contractors also have to file a monthly return listing everything they paid you and deducted.

Getting the money back

How you reclaim depends on how you trade.

Sole trader or partnership: the deductions go on your Self Assessment return against your tax and National Insurance for the year. If they add up to more than you owe, HMRC refunds the difference. For a lot of subcontractors that’s exactly what happens, because 20% of labour is usually more tax than they actually end up owing.

Limited company: you claim through your payroll scheme, offsetting the deductions against PAYE, National Insurance and CIS you owe as an employer, rather than through Corporation Tax.

Either way it’s an annual reckoning, which is why gross payment status is worth having once you qualify. It doesn’t cut the bill, it just stops HMRC holding your money for most of a year.

Common mistakes

Not registering. 30% instead of 20% on every invoice, for no benefit whatsoever.

Not keeping the statements. They’re the evidence for your claim. Collect them monthly, not in April.

No receipts for materials. Without evidence the contractor estimates, and you lose out.

Assuming domestic work is in scope. Invoicing a homeowner directly means no deduction at all.

Thinking CIS is an extra tax. It’s an advance payment against a bill you already owed.

Do this in FieldHive

Split labour from materials before you send the invoice and you’ll spot a wrong deduction while it’s still fixable. Use the CIS tax calculator to see the deduction at 20% or 30% with materials and plant taken out first. Invoice with the deduction and the reverse charge handled on one document using the CIS and VAT invoice generator, and if you pay subcontractors yourself, produce their statements with the payment and deduction statement generator.

Aid, not advice

This guide explains how CIS works so you can check what’s being deducted and reclaim it properly. It is not tax advice. Employment status, and whether you should be a subcontractor at all on a given job, carries real risk for both sides. Speak to your accountant or HMRC if you are unsure.

Rates, thresholds and deadlines checked on gov.uk August 2026: CIS deduction rates 20% / 30% / 0%; the pre-deduction exclusion list; the 14-day payment and deduction statement deadline; the 19th monthly return deadline.