Is CIS deducted from my markup on materials?

Yes. Materials bought for £350 and invoiced at £400 come off at £350. The £50 of markup stays in the amount CIS is deducted from.

Does the cost of plant I own come off before CIS?

No. Plant hired from someone else comes off, with the fuel and other consumables it uses. For plant you own, only the fuel and other consumables come off.

Is CIS deducted from travel and accommodation?

Yes. Travel, subsistence and accommodation paid to you under the contract are part of the payment, so CIS is deducted from them. The calculator counts them in the labour after materials, and the office keeps expense lines on your invoices in its figure too.

Does gross payment status stop the reverse charge?

No. Gross payment status means nothing is deducted. The payment is still reported under CIS, so work for a VAT-registered contractor is still reverse charged where the other conditions hold.

Does the calculator work out a CIS tax refund?

No. It works out one payment at a time. For a sole trader, a refund depends on the whole tax year: the profit, the allowances and every deduction taken. A limited company sets its deductions against the PAYE and National Insurance it owes HMRC instead.

Does the invoice show the CIS deduction?

No. The invoice keeps its full amount before VAT and any VAT it charges. The office never puts a CIS deduction on it, as a discount or as a line.

For subcontractors and contractors

The CIS deduction, worked out from the labour.

Three figures from one invoice: the labour after materials, the CIS deducted and what you are paid, with VAT added or under the reverse charge.

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What the calculator works out

The labour after materials is the invoice before VAT less the materials at your cost, and never less than zero. An empty materials box counts as none.

The CIS deducted is the labour after materials at your rate: 20% registered, 30% not registered, or 0% with gross payment status. The deduction is rounded half-up to the penny.

The VAT is 20%, 5% or 0% of the invoice before VAT, or none under the reverse charge. You are paid the invoice before VAT, plus that VAT, less the CIS deducted.

The rule, from HMRC’s CIS340 guide

HMRC tells the contractor which rate to deduct when the contractor verifies the subcontractor. CIS is never deducted from the VAT.

The costs below come off at what the subcontractor actually paid for them. The contractor can ask for receipts, and estimates a cost where there are none. For a subcontractor not registered for VAT, the VAT paid on a cost counts in that cost. The calculator’s materials box takes every cost on this list:

Materials
Consumable stores
Fuel, except fuel for travelling
Plant hired for the job
Manufacturing or prefabricating materials

A worked example

An invoice is £2,400 before VAT, with £625 of materials at cost. The labour after materials is £1,775. At 20%, the CIS deducted is £355.

Under the domestic reverse charge the invoice charges no VAT, so you are paid £2,045. Where the reverse charge does not apply, VAT at 20% adds £480 and you are paid £2,525.

At 30%, the CIS deducted is £532.50, and under the reverse charge you are paid £1,867.50.

A deduction can fall on a half penny. On labour of £777.75, 30% is £233.325, which rounds half-up to £233.33.

VAT and the domestic reverse charge

Since 1 March 2021, most construction work reported under CIS between two VAT-registered businesses is reverse charged. The contractor pays you no VAT and accounts for it to HMRC. The charge covers work at 20% and 5%, and zero-rated work is outside it.

VAT is charged as usual where the contractor is not registered for VAT, or is an end user or an intermediary supplier and has said so in writing. CIS is still deducted from the labour. A subcontractor not registered for VAT charges no VAT at all.

The same rule in the office

On an invoice for construction work to a customer whose type is Principal contractor, the calculator’s last two figures are recorded as two payments. What you are paid goes in with Record a payment, with How it arrived set to how the money came, such as Bank transfer. The CIS deducted is recorded as Tax withheld at source, with its Rate and the contractor’s figure in Materials on their statement.

Each deduction is kept with its basis, the invoice before VAT less the materials left out. A deduction bigger than its basis is refused. A customer of that type with no VAT number is not reverse charged, and what that customer deducts is recorded the same way.

On the bigger plans the office does the calculator’s sum itself when you pay your own subcontractors. Mark it paid on a subcontractor’s bill takes each line’s CIS kind and cost, applies the subcontractor’s CIS rate with the same rounding, and shows To pay.

Questions, answered.

Is CIS deducted from my markup on materials?: Yes. Materials bought for £350 and invoiced at £400 come off at £350. The £50 of markup stays in the amount CIS is deducted from.
Does the cost of plant I own come off before CIS?: No. Plant hired from someone else comes off, with the fuel and other consumables it uses. For plant you own, only the fuel and other consumables come off.
Is CIS deducted from travel and accommodation?: Yes. Travel, subsistence and accommodation paid to you under the contract are part of the payment, so CIS is deducted from them. The calculator counts them in the labour after materials, and the office keeps expense lines on your invoices in its figure too.
Does gross payment status stop the reverse charge?: No. Gross payment status means nothing is deducted. The payment is still reported under CIS, so work for a VAT-registered contractor is still reverse charged where the other conditions hold.
Does the calculator work out a CIS tax refund?: No. It works out one payment at a time. For a sole trader, a refund depends on the whole tax year: the profit, the allowances and every deduction taken. A limited company sets its deductions against the PAYE and National Insurance it owes HMRC instead.
Does the invoice show the CIS deduction?: No. The invoice keeps its full amount before VAT and any VAT it charges. The office never puts a CIS deduction on it, as a discount or as a line.

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