Pricing and 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 deduction rate (%)
- amount paid to the subcontractor (£)
Explain this equation
Works out the Construction Industry Scheme deduction on a subcontractor's invoice and what they actually get paid.
CIS is only deducted from the labour element. VAT and the cost of materials the subcontractor bought are taken off the gross first, leaving B_n. The deduction is the CIS rate applied to that. The subcontractor receives the gross invoice less the deduction, so they still get their VAT and materials money in full.
A percentage of the labour part only, deducted from the whole payment.
Sense check: a £2400 invoice with £400 of materials and no VAT gives £2000 labour; at 20% the deduction is £400 and £2000 is paid.
Watch out: the rate depends on the subcontractor's verification: gross payment (0%), registered (20%) or unregistered (30%). Materials must be at cost, without the subcontractor's markup.
Works out the Construction Industry Scheme deduction a contractor takes from a roofing subcontractor’s invoice, and the amount actually paid.
Enter your values to see the result.
Good to know
HMRC rates: 20% for subcontractors registered for CIS, 30% if not registered, 0% with gross payment status. The deduction is taken from the invoice total after removing VAT and the cost of materials (membranes, lead, timber, consumables, plant hire) that the subcontractor bought directly. The deduction counts towards the subcontractor’s tax and National Insurance, so keep the monthly statements.
Common mistake
Applying the deduction to the whole invoice including materials and VAT, or not registering for CIS and losing an extra 10% of the labour until the tax return.
Limits
Simple calculation. Materials must be genuine costs the subcontractor paid. Does not cover the VAT domestic reverse charge.
Sources
Results are calculations from the published methods and figures shown, and depend on the data you enter. Follow the roof covering manufacturer’s fixing specification, BS 5534, BS 8000-6, BS 6229, the Lead Sheet Training Academy guidance and Building Regulations. Wind uplift and structural design need a competent designer.