CIS Calculator (with VAT and materials)

How to calculate CIS deductions

The Construction Industry Scheme is a withholding scheme, not an extra tax. When a contractor pays a subcontractor for construction work, they hold part of the money back and send it to HMRC as an advance payment against that subcontractor's tax and National Insurance. You get it back later. The bit everybody gets wrong is the base the percentage is applied to — because it is never the invoice total.

HMRC's instruction to contractors is to start with the gross amount of the invoice and take off everything that falls outside the scheme before applying the rate:

• VAT charged by the subcontractor.
• Materials, but only where the subcontractor paid for them directly.
• Plant hire — equipment hired in for that job.
• Consumable stores — kit used up on the job and no longer usable.
• Fuel used on site, other than fuel for travelling.
• Manufacturing or prefabricating materials.

What survives that list is the labour element, and the deduction is a straight percentage of it: 20% if you are registered under the scheme and the contractor has verified you, 30% if you are not registered or cannot be verified, and nothing at all if you hold gross payment status. There is no allowance, no threshold and no tapering — the first pound of labour is deducted at the same rate as the last.

The practical consequence is that the effective bite on a typical job is nowhere near 20%. On a job that is half materials, a 20% subcontractor sees around 10% of the invoice held back. That is the number this calculator shows you underneath the result, because it is the one that actually tells you what is landing in the bank.

Worked example 1: £1,200 labour, £400 materials, 20% CIS, VAT registered

A registered spark, VAT registered at the standard rate, subbing a rewire for a builder. Not an end user job, but for this first example assume the reverse charge does not apply and you are charging VAT normally. Every line, in order:

Two things worth pinning up in the van. First, you are still paid the whole £320 of VAT — CIS never touches it, and it is not yours to keep, so put it aside for the return. Second, if the contractor had applied 20% to the invoice total instead of the labour, the deduction would have been £384. You would have been £144 light on a single job and would not get it back until you filed. That is the single most common CIS error, and it is why the labour and materials split has to be visible on the face of the invoice rather than buried in a description.

Worked example 2: 30% unverified, plant hire, and the reverse charge

Now a harder one, and much closer to real life. Bigger job for a main contractor: £2,400 of labour, £650 of materials you bought, and £180 for a scissor lift you hired in for two days. You have not registered under the scheme yet, so the contractor deducts at 30%. You are VAT registered, the contractor is VAT registered, the payment is reported under CIS and they have not confirmed in writing that they are an end user — so the domestic reverse charge applies and you do not collect the VAT.

Plant hire is excluded from the CIS base in exactly the same way materials are, so for the purposes of this calculator you can add the £180 of hire into the materials box. £650 + £180 = £830 outside the scheme.

Three lessons in one invoice. The £180 of plant hire kept £54 out of HMRC's hands that a careless invoice would have handed over. Being unregistered cost £240 of cash flow on one job — not lost, but not yours until you file. And under the reverse charge £646 of VAT never lands in your account, so if you have been treating the VAT float as working capital, the reverse charge is the thing that breaks that habit. Register for the scheme, and either move to monthly VAT returns or price in the gap.

Why materials are excluded — and where it goes wrong

CIS is an advance on your tax, and you are not taxed on the money you spent at the wholesaler. If a contractor deducted 20% from your materials, they would be withholding tax against profit you never made. So the scheme takes the materials cost out first, and the deduction lands only on the part of the payment that represents your work.

There are three conditions attached, and each one bites in practice. The materials have to be for that contract. You have to have paid for them yourself — if the contractor supplied the cable, it is not your materials cost, and only the person who actually bought them can claim the exclusion. And the figure must be the real direct cost, not a marked-up one. A contractor is entitled to ask for receipts and is expected to check the materials figure is not overstated, so padding the materials line to shrink the deduction is not a clever wheeze — it is the contractor's problem if HMRC comes looking, which means it will be your problem the next time they price work.

Where it goes wrong is almost always the invoice, not the arithmetic. A single line reading "Rewire, 3-bed semi — £1,600" gives the contractor nothing to work with. Their bookkeeper deducts 20% of £1,600 because there is no other figure on the page, and you are £80 down. Split every invoice into a labour line and a materials line, keep plant hire on its own line, and put the VAT underneath. Take a copy of this page's result link with you if it helps — it shows the contractor the same figures you are working from.

20%, 30% or gross — which rate applies to you

There are only three outcomes, and which one you get is decided before the job starts, when the contractor verifies you with HMRC.

If you are sitting at 30%, registering is the highest-return admin job on your list: it is free, it takes minutes, and on the second worked example above it puts £240 back in your pocket on a single job. Gross status is worth chasing once you are turning over properly and your filing is genuinely tidy — the compliance side is unforgiving, and losing it mid-year is worse than never having had it.

One thing the rate never depends on: the customer. CIS only applies to payments between a contractor and a subcontractor for construction work. Private domestic work for a householder is not caught at all — no verification, no deduction, invoice the lot. Set the calculator to 0% for those jobs.

CIS and the VAT domestic reverse charge together

This is the pairing that generates the most confused phone calls, mostly because the two schemes overlap without being connected. The reverse charge decides who pays the VAT over to HMRC. CIS decides how much of your labour is withheld. Neither affects the other's arithmetic.

You have to apply the reverse charge when all of the following are true: your customer is registered for VAT in the UK; payment for the supply is reported within the Construction Industry Scheme; the services you supply are standard or reduced rated; you are not an employment business supplying staff or workers; and your customer has not given you written confirmation that they are an end user or intermediary supplier. Miss any one of those and you charge VAT the normal way.

That end-user confirmation is the clause worth knowing by heart. An end user is the business that will actually use the finished building rather than sell the construction service on — and they have to tell you in writing. Get it in an email and file it. Without it, you reverse charge; with it, you charge VAT as usual.

When it does apply, your invoice still shows all the usual VAT invoice information, plus a note making clear that the domestic reverse charge applies and that the customer must account for the VAT. State how much VAT is due under the reverse charge, or if you cannot show the amount, the rate — but do not include that VAT in the amount you are charging. HMRC accepts wordings such as "reverse charge: VAT Act 1994 Section 55A applies", "reverse charge: S55A VATA 94 applies" or "reverse charge: customer to pay the VAT to HMRC". Tick the reverse charge box in the calculator above and it will show you the VAT figure to state and confirm that the CIS deduction has not moved a penny.

There is a longer walkthrough in the domestic reverse charge explained for electricians, and the broader VAT picture is in VAT for electricians.

Working backwards: net to gross

Most calculators only run one way. The question sparks actually ask is the other one: "I need £2,000 in the bank on this job — what do I have to invoice?" Switch the calculator above to What must I invoice? and it solves the sum backwards, either for the whole payment landing in your account or for the labour take-home after the deduction.

The arithmetic is not a case of adding 20% back on — that is the classic error, and it always leaves you short. If the deduction takes 20% off your labour, you have to divide by 0.8 to get back to it, not multiply by 1.2. To take home £1,000 of labour at the 20% rate you must invoice £1,250 of labour, not £1,200. At 30% you divide by 0.7, so £1,000 take-home needs £1,428.57 invoiced.

There is a dedicated page for this with the full method, more examples and the trap in detail: CIS calculator: net to gross.

Getting your CIS deductions back

None of this money is lost. Everything withheld is an advance payment against your tax and National Insurance, and how you reclaim it depends on how you trade.

Sole trader or partnership: on your Self Assessment return you enter your total pay before deductions as income, and the total the contractors deducted as CIS deductions. HMRC works out what you owe, sets the deductions against it, and refunds the difference. For a spark who is mostly subbing, the deductions frequently exceed the final bill, which is why CIS refunds are a regular feature of the trade.

Limited company:you do not use Self Assessment for it. You claim through your payroll scheme, sending the usual Full Payment Submission and an Employer Payment Summary showing the year-to-date CIS deductions. HMRC sets those against the company's PAYE bill; anything left over rolls forward within the tax year, and you can claim a repayment after the year end.

Either way, the paperwork that proves it is the payment and deduction statement. A contractor who makes deductions has to give you one for each tax month within 14 days of the end of that tax month — so for the tax month running 6 May to 5 June, by 19 June. Keep every one. If a contractor is vague about issuing them, that is the moment to get insistent, not at the end of the tax year when you are trying to reconcile a year of payments from memory.

More detail for subbies in CIS deductions explained for electricians, and if the deductions are eating your cash flow, getting paid faster is usually the bigger lever.