Last checked October 2026 · by the PaySorted team
How CIS works
Under the Construction Industry Scheme (CIS), contractors deduct money from subcontractors' payments and pass it to HMRC as an advance on the subcontractor's tax and National Insurance. The rate depends on your registration:
| Your status | Deduction |
|---|---|
| Registered for CIS | 20% |
| Not registered | 30% |
| Gross payment status | 0% (nothing deducted) |
The deduction is on labour only
The deduction is taken from the labour part of your invoice. The contractor doesn't take it from:
- materials you've bought for the job (the cost to you)
- VAT
- other costs such as plant hire, fuel for the job, or the CITB levy
So your invoice should show labour and materials separately.
Worked example
You're CIS registered (20%) and not VAT registered:
| Labour | £1,500.00 |
| Materials | £400.00 |
| Total | £1,900.00 |
|---|---|
| Less CIS deduction (20% of £1,500 labour) | −£300.00 |
| Amount payable | £1,600.00 |
If you're VAT registered, VAT is added on the full £1,900, but the CIS deduction is still only taken from the labour. In many cases the VAT domestic reverse charge also applies, so you don't charge the VAT at all.
CIS invoice example with reverse charge VAT
You're CIS registered (20%), VAT registered, and the contractor is VAT and CIS registered and not the end user, so the VAT domestic reverse charge applies. Your invoice looks like this:
| Labour — second fix electrics, Plot 4 | £1,500.00 |
| Materials | £400.00 |
| Total (excluding VAT) | £1,900.00 |
|---|---|
| VAT at 20% — reverse charge: customer to account to HMRC | £380.00 (not charged) |
| Less CIS deduction (20% of £1,500 labour) | −£300.00 |
| Amount payable | £1,600.00 |
The invoice should also show your VAT number and say clearly that the domestic reverse charge applies, for example: "Reverse charge: Customer to pay the VAT to HMRC". You show the VAT amount so the contractor can account for it, but you don't add it to what they pay you. See the VAT domestic reverse charge for when it applies.
Get your statement
The contractor must give you a payment and deduction statement each month, showing what was deducted. Keep these — they're how you claim the deductions back against your tax bill. It's worth adding a line on your invoice asking for it.
Let the software do it
In PaySorted, turn on "I'm a CIS subcontractor" and choose your rate. Mark each line as labour or materials and the deduction is worked out on labour only, shown on the invoice, and taken off the amount due. If the contractor pays late, reminders go out automatically.
General information based on HMRC guidance (checked October 2026), not tax advice. Your accountant can confirm how CIS applies to you.
Common questions
Is CIS deducted from materials?
No. CIS is only deducted from the labour part of the invoice. Show materials separately so they aren't included.
Is CIS deducted from VAT?
No. VAT is never included in the CIS deduction.
What CIS rate will be deducted?
20% if you're registered for CIS, 30% if you aren't, and nothing if you have gross payment status.
What does a CIS invoice look like?
It looks like a normal invoice, but with labour and materials shown separately, the CIS deduction taken from the labour only, and the amount the contractor will actually pay at the bottom. See the worked examples on this page.
How do I show reverse charge VAT on a CIS invoice?
Show the VAT rate and the VAT amount, say clearly that the domestic reverse charge applies (for example "Reverse charge: Customer to pay the VAT to HMRC"), and don't add the VAT to the total the customer pays you. The CIS deduction is still taken from the labour only.