CIS deduction calculator

The deduction is never taken from the whole invoice. It comes off what is left once materials, hired plant and a short list of other costs have been taken out, and getting that base wrong is the most common CIS mistake there is. Deduct on the full figure and you have short-paid a subcontractor who will notice. Deduct on too little and HMRC recovers the difference from you, not from them.

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One thing before you start, because it catches people on partial valuations: the deduction is made from the payment, not from the invoice. If you’re certifying less than was invoiced — a contra, a disputed item, a valuation short of the application — put in what you’re actually paying for the work, excluding VAT.

What comes off before the rate is applied

Start with the gross invoice for the work and take off, in this order: VAT · consumable stores · fuel used, other than for travelling · plant hired for the job · manufacturing or prefabricating materials · and materials, where the subcontractor paid for them directly. Whatever remains is the amount the percentage is applied to.

Three of those carry a trap worth knowing before it costs you an argument on a Friday afternoon.

Materials mean the direct cost, not the invoiced cost

“Direct cost” is what the subcontractor can demonstrate they paid. If they bought £2,000 of rebar and invoiced it on at £2,400, the £400 is not a materials cost — it stays in the deductible amount. HMRC is explicit that a healthy margin on materials is not a reason for a subcontractor to withhold the figure, and the regulations put the duty to be satisfied the materials cost is reasonable on the contractor. If they won’t evidence it, you may estimate it and deduct accordingly.

Hired plant comes off. Owned plant does not

Plant a subcontractor hires in from a third party for the job is treated as materials, along with the fuel needed to run it. Plant they own gets nothing — there is no notional hire charge, no matter what it cost them to buy or what it is worth per week. The fuel it burns doing the work still comes off.

Travel and subsistence stay in

Travelling expenses, fuel to get to site and subsistence paid to or for the subcontractor all stay in the gross amount the deduction is calculated from. This is the line people most often get backwards, because the fuel exclusion sounds general and isn’t: fuel burned by plant doing the work comes off, fuel burned getting a van to Doncaster does not.

A worked example

A groundworks subcontractor, registered under CIS, invoices £12,500 for the month excluding VAT. Of that, £2,800 is materials they bought and paid for, £650 is an excavator hired in for two weeks, £180 is red diesel for it, and £120 is blades and abrasives. The reverse charge applies, so no VAT is on the invoice.

Materials and plant total £3,750. That leaves £8,750 as the amount the deduction applies to, so the deduction is 20% of £8,750 — £1,750 — and the payment is £10,750.

Applying 20% to the whole £12,500 would have deducted £2,500. That is £750 held back from a subcontractor who was entitled to it, on one invoice, in one month.

After the calculation: what you owe HMRC and them

Pay the deductions to HMRC by the 22nd of the month, or the 19th if you pay by post, and file the monthly return by the 19th. A subcontractor with gross payment status still goes on that return — 0% is a deduction rate, not an exemption from reporting the payment. Every subcontractor you deducted from is owed a payment and deduction statement within 14 days of the end of the tax month, showing the gross amount excluding VAT, the materials cost excluding VAT and the amount deducted. Keep the records for at least three years after the end of the tax year — HMRC can ask for them, and a failure to produce them carries penalties up to £3,000.

Where these rules come from

The rates and the list of what comes off the gross amount are from HMRC’s contractor guidance, Make deductions and pay subcontractors. The direct-cost rule and the contractor’s duty on materials are from the Construction Industry Scheme Reform Manual at CISR15060, and the plant-hire treatment from CISR15090. Travel and subsistence, the VAT exclusion and the 14-day statement deadline are from CIS 340, HMRC’s guide for contractors and subcontractors. The reverse-charge conditions, and the end-user and intermediary-supplier exclusions, are from Check when you must use the VAT domestic reverse charge. All checked on 14 August 2026.

This is a calculator and an explanation, not tax advice, and it can’t tell you whether a materials figure you’ve been handed is honest. If your position is unusual — a mixed contract, a dispute over what counts as construction operations, a verification that came back differently to what you expected — ask your accountant or HMRC.