Running the business
CIS deduction on a subcontractor invoice
- where
- amount the deduction applies to (£)
- gross invoice total (£)
- VAT on the invoice (£)
- materials paid for by the subcontractor (£)
- CIS deduction (£)
- CIS rate: 20% registered, 30% unregistered, 0% gross status
- amount paid to the subcontractor (£)
Explain this equation
Works out the Construction Industry Scheme deduction a main contractor takes from a decorating subcontractor's invoice, and what the subcontractor actually receives.
G is the invoice total. Vt is any VAT on it and Mt the paint and materials the subcontractor bought. Bn, what is left, is essentially the labour. cr is the CIS rate and Dc the deduction. Pn is what is paid.
HMRC applies CIS only to labour, so VAT and materials come off first. The deduction is then a straight percentage, and the payment is the invoice less the deduction.
Sense check: £1,800 with £300 of materials leaves £1,500; 20% is £300, so £1,500 is paid. Unregistered at 30%, the deduction is £450.
Watch out: the deduction is an advance on your tax, not a cost; keep the monthly statements for your return.
Works out the Construction Industry Scheme deduction a contractor takes from a decorating subcontractor's invoice, and what is actually paid.
Enter your values to see the result.
Good to know
HMRC rates: 20% for registered subcontractors, 30% if not registered, 0% with gross payment status. The deduction applies to the invoice after removing VAT and the cost of materials (paint, sundries, plant hire) the subcontractor bought directly. Deductions count towards the subcontractor's tax and National Insurance, so keep the monthly statements.
Common mistake
Deducting from the whole invoice including materials and VAT, or not registering for CIS and losing 30% instead of 20% until the year-end return.
Limits
Simple calculation. Materials must be genuine costs; the contractor may ask for evidence. Does not cover how the VAT domestic reverse charge is invoiced.
Sources
Results are calculations from the published methods and figures shown, and depend on the data you enter. Coverage depends on the product, surface and application. Always follow the paint and wallcovering manufacturers’ data sheets and BS 6150 / BS 8000-12. Check prices and VAT with your own records and HMRC.