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Estimate a Construction Industry Scheme deduction and the net amount payable using the 20%, 30% or gross-payment rate.
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Calculate a CIS deduction
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CIS is not deducted from VAT. Enter the VAT separately.
For example, qualifying materials paid for directly, consumable stores, job-specific plant hire and eligible fuel. Keep evidence.
How to calculate a CIS deduction
Start with the subcontractor’s invoice amount. Keep VAT separate because contractors do not apply CIS deductions to VAT. Next, deduct qualifying direct costs that the subcontractor paid for the specific job. Apply the HMRC-verified percentage to the remaining amount.
The calculator then subtracts the CIS deduction from the full invoice, including VAT, to estimate the net payment due to the subcontractor.
Current CIS deduction rates
| Subcontractor status | Rate |
|---|---|
| Registered and successfully verified | 20% |
| Unregistered or not verified | 30% |
| HMRC gross payment status | 0% |
A contractor must verify a subcontractor and use the deduction rate supplied by HMRC. The calculator must not be used to choose the rate.
Which costs can be removed before CIS?
- VAT shown on the invoice
- Materials paid for directly by the subcontractor for that contract
- Consumable stores that become unusable
- Fuel used for the work, excluding travel fuel
- Plant hire for the specific job
- Manufacturing or prefabricating materials
Contractors should keep evidence of direct material and plant costs. Labour, travel, accommodation and general overheads are not automatically removed from the deduction base.
CIS calculation example
A subcontractor invoices £10,000 plus £2,000 VAT and has £3,000 of qualifying direct material costs. The CIS deduction base is £7,000. At 20%, the contractor deducts £1,400, so the net payment is £10,600.
What subcontractors should keep
- Invoices showing labour, materials and VAT clearly
- Receipts for materials paid for directly
- Monthly payment and deduction statements
- Bank records matching contractor payments
- Details of gross payments and deductions for the tax year
CIS deductions are advance payments, not necessarily the final tax liability. Sole traders and partners normally report gross income and CIS deductions through Self Assessment. Limited companies generally use their PAYE scheme and Employer Payment Summary process.
How Real Key Accountancy can help
- Organise contractor and subcontractor records
- Reconcile invoices, statements and bank payments
- Maintain bookkeeping for CIS businesses
- Support contractor monthly return records
- Track VAT and domestic reverse-charge transactions
Read about our CIS bookkeeping services in Wolverhampton, estimate sole trader liabilities with our Self-Employed Tax Calculator, or contact Real Key Accountancy.
Official CIS guidance
The calculation rules were checked in August 2026 against HMRC’s guidance on making CIS deductions and subcontractor payments. Always check the latest HMRC instructions.
Frequently asked questions
Is CIS deducted from VAT?
No. VAT is removed before the CIS percentage is applied.
Is CIS deducted from materials?
Qualifying materials paid for directly by the subcontractor for the particular contract can normally be removed before the deduction. Keep supporting evidence.
Is a CIS deduction an extra business expense?
No. It is an advance payment towards the subcontractor’s tax and National Insurance position.