Works out the CIS tax a contractor deducts from a subcontractor's payment.
Deduction applies to the labour element only: gross (excl VAT) less qualifying materials, times the status rate.
For guidance only. Verify the subcontractor's status with HMRC and confirm figures with your accountant.
About this CIS deduction calculator
This free CIS deduction calculator works out the tax a contractor must deduct from a subcontractor's payment under the UK Construction Industry Scheme and pass to HMRC. Enter the gross payment (excluding VAT), the cost of qualifying materials, and the subcontractor's CIS status, and it returns the labour element, the CIS deduction and the net amount the subcontractor receives. It is aimed at UK contractors, subcontractors and estimators handling payment applications and tender pricing. The deduction is a payment on account of the subcontractor's tax and National Insurance, not an extra cost to either party.
How the CIS deduction is calculated
The deduction applies to the labour element only. The cost of qualifying materials, direct materials, consumable stores, fuel for plant and plant hire. Is taken off the VAT-exclusive gross before the rate is applied, and VAT is excluded from the CIS amount entirely. So labour = gross (excl VAT) − qualifying materials, and CIS deduction = labour × rate. The net payment is gross − CIS deduction. Method and worked example per HMRC CIS340: Construction Industry Scheme: a guide for contractors and subcontractors: gross £700 less £200 materials gives £500 labour, deducted at 20% for a £100 deduction and £600 net. Rates are 0% for gross payment status, 20% for registered/verified subcontractors and 30% for unregistered or unverified ones.
Frequently asked questions
What rate of CIS should I deduct?
Deduct 20% from a subcontractor HMRC has verified as registered, 30% from one who is unregistered or you cannot verify, and 0% from a subcontractor with gross payment status. Always verify the subcontractor with HMRC before the first payment. The rate it confirms is the one to use.
Are materials and VAT included in the CIS deduction?
No. The cost of qualifying materials is deducted from the gross before the rate is applied, and VAT is never part of the CIS amount. The deduction is taken from the labour element of the VAT-exclusive payment only.
Who pays the CIS deduction to HMRC?
The contractor withholds the deduction from the subcontractor's payment and pays it to HMRC, then gives the subcontractor a payment and deduction statement. The subcontractor sets the amount against their own tax and National Insurance bill.