Under the Construction Industry Scheme, a contractor deducts 20% from a registered subcontractor’s labour, 30% if they are not registered, and nothing if they have gross payment status. Take VAT and the cost of materials off the invoice first: the deduction applies to what is left. Pay the deductions to HMRC by the 22nd of the month (19th by post) and file a monthly return by the 19th.
1. Start with the gross invoice.
2. Take off VAT and the amount the subcontractor paid for materials, consumable stores, fuel (not for travelling), plant hire and prefabricated materials.
3. Deduct the rate HMRC gave you when you verified them: 20%, 30% or 0%.
Worked example. A registered subcontractor invoices £1,200 including £200 VAT and £300 of materials. £1,200 − £200 − £300 = £700 of labour. 20% of £700 is £140, so pay them £1,060 and pay £140 to HMRC.
Frequently asked questions
What are the CIS deduction rates?
20% for registered subcontractors, 30% for those not registered, and 0% for subcontractors with gross payment status. HMRC tells you which applies when you verify them.
Is CIS deducted from materials?
No. Take off the cost of materials the subcontractor paid for directly, and VAT, before working out the deduction.
When do I pay CIS deductions to HMRC?
By the 22nd of the month after the tax month ends (the 19th if paying by post). Tax months run from the 6th to the 5th.
When is the CIS monthly return due?
By the 19th of every month following the last tax month, even if you only paid one subcontractor.
What do I give the subcontractor?
A payment and deduction statement within 14 days of the end of each tax month.
Read next
Sources
- CIS contractors: make deductions and pay subcontractors – GOV.UK
- What you must do as a CIS contractor – GOV.UK
- What you must do as a CIS subcontractor – GOV.UK
UK Construction Industry Scheme. Check the subcontractor’s status with HMRC before paying; this does not verify anyone.
General guidance, not legal or tax advice. Last checked 4 November 2026 against the sources above.