CIS Calculator

If you work in construction in the UK, the Construction Industry Scheme (CIS) decides how much of each invoice you actually receive. Contractors take a deduction from subcontractors' payments and pass it to HMRC as an advance towards the subcontractor's tax and National Insurance. Getting the sum wrong means either paying a subcontractor too much or leaving them short.

Our CIS Calculator works out the deduction and the net payment for you. This guide explains what's deducted, what isn't, and how subcontractors get the money back.

The three CIS rates

The rate depends on the subcontractor's status with HMRC, which the contractor checks when they verify them:

• 20% if the subcontractor is registered for CIS.
• 30% if they're not registered.
• 0% if they have gross payment status, which means nothing is deducted and they pay their tax in the normal way.

What the deduction is taken from

The deduction only applies to the labour part of the payment. Before applying the rate, the contractor starts with the invoice total and takes away what the subcontractor paid for:

• Materials, including the cost of manufacturing or prefabricating them.
• Plant hire, meaning equipment hired for the job.
• Fuel, except fuel used for travelling.
• Consumable stores, such as equipment that's been used up on the job.
• VAT, which is never part of the CIS calculation.

The contractor can ask for receipts for materials. If there aren't any, they can estimate the cost.

How to use the calculator (CIS Calculator)

1. Choose the subcontractor's CIS status: registered, not registered or gross.
2. Enter the invoice total, excluding VAT.
3. Enter the cost of materials the subcontractor paid for.
4. Add any plant hire, fuel and consumables, if there are any.

The calculator shows the labour figure the rate applies to, the CIS deduction and the net amount to pay.

A worked example

With the calculator's default settings, a registered subcontractor sends an invoice for £2,500 excluding VAT, including £600 of materials:

• Labour: £2,500 − £600 = £1,900
• CIS deduction: £1,900 × 20% = £380
• Net payment: £2,500 − £380 = £2,120

If the same subcontractor weren't registered, the deduction would be £1,900 × 30% = £570, and they'd receive £1,930. That's why registering for CIS is worth doing as soon as you start.

What about VAT?

VAT is left out of the CIS calculation entirely. Since 1 March 2021, most construction services between VAT-registered businesses in the scheme use the domestic reverse charge. The subcontractor doesn't charge VAT on their invoice. Instead, the contractor accounts for it on their own VAT return. The reverse charge doesn't apply when the customer is the end user, such as a homeowner.

Getting CIS deductions back

CIS deductions aren't an extra tax. They count towards the subcontractor's tax bill:

• Self-employed subcontractors claim the deductions on their Self Assessment tax return. If more was deducted than they owe in Income Tax and National Insurance, HMRC pays a refund. Many subcontractors get money back because the deduction ignores their personal allowance and business expenses.
• Limited companies reclaim the deductions through their monthly payroll submission to HMRC, setting them against PAYE and National Insurance they owe.

Keep every payment and deduction statement your contractor sends. Contractors must give one within 14 days of the end of each tax month, and you'll need them to claim the money back.

Gross payment status

With gross payment status, contractors pay you in full and you pay your tax through Self Assessment or Corporation Tax. To qualify, you usually need to show that your business:

• has paid your tax and filed returns on time,
• does construction work in the UK through a bank account, and
• has construction turnover above HMRC's threshold over the past 12 months.