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My subcontractor won’t split labour and materials: how much CIS do I deduct?

October 18, 2026
Contractor checking a subcontractor invoice to work out CIS on materials

Written by the Brickbooks and Payroll team. Reviewed by a MAAT-qualified accountant. Last reviewed: 19 October 2026 (figures checked on gov.uk on 18 October 2026).

If you pay subcontractors under the Construction Industry Scheme (CIS), sooner or later an invoice turns up that mixes labour and materials, or doesn’t split them at all. This guide explains CIS on materials in plain terms: what CIS comes off, what proof you can ask for, what to do if you don’t get it, and how the VAT reverse charge fits in. The HMRC sources are listed at the end.

CIS on materials: the short answer

  • CIS doesn’t come off what the subcontractor actually paid for the materials for your job.
  • It does come off everything else, including labour, travel and any mark-up on the materials.
  • You can ask for receipts. If you don’t get them, you estimate the materials cost and take CIS off the rest.

This comes from gov.uk guidance for CIS contractors.

Worked example: CIS on materials

A subcontractor registered for CIS at 20% sends you a £2,000 invoice for a supply and fix job. Here’s how CIS on materials works out:

  • Receipts show £1,200 of materials. CIS comes off £800. 20% of £800 is £160, so you pay £1,840.
  • No materials at all. CIS comes off the full £2,000. That’s £400, so you pay £1,600.
  • Invoice says £1,950 is materials, but no receipts. You estimate the real materials cost, take CIS off the rest, and write down how you reached your estimate.

These figures are made up to show how the sums work. VAT is left out to keep it simple.

How CIS on materials is worked out

There are three steps (gov.uk):

  1. Start with the full invoice total.
  2. Take off what the subcontractor paid for:
  • materials they bought themselves for this job
  • plant they hired for this job
  • consumables (equipment that gets used up)
  • fuel used on the job (not fuel for travelling)
  • the cost of making or prefabricating materials
  • VAT
  1. Take CIS off what’s left: 20% if they’re registered, 30% if they’re not, and nothing if they have gross payment status.

Travel costs paid to the subcontractor are not materials, so CIS comes off them too.

Invoice showing CIS on materials: CIS deducted on labour and mark-up, not on direct materials cost or VAT

What “direct cost” means for CIS on materials

HMRC calls it the “direct cost”: what the subcontractor can show they paid (HMRC manual CISR15060). In practice:

  • Cost, not price. If they’ve added a mark-up to the materials, CIS comes off the mark-up.
  • Only if they bought them. If you supplied the materials, or paid them back for them, they don’t come off. HMRC made this clearer from April 2021.
  • This job only. Materials for other jobs don’t count.

What if the invoice doesn’t split labour and materials?

Five steps for working out CIS on materials when the split isn’t clear:

  1. Ask. Ask the subcontractor for receipts or suppliers’ invoices for the materials on this job.
  2. Check. Make sure the figure looks reasonable for the job. HMRC puts this on the contractor.
  3. Estimate. No receipts? Make a reasonable estimate of the materials and take CIS off the rest.
  4. Record. Keep the receipts, or a note of how you worked out your estimate, so the CIS on materials figure can be checked later.
  5. Show it. Put the materials figure on the payment and deduction statement you give the subcontractor.

These steps come from HMRC’s manual and the CIS 340 guide.

When the invoice gets re-split

A situation the team has come across: an invoice was first sent as labour only, so CIS came off the whole amount. It was then sent again with a small labour figure and the rest shown as materials.

HMRC’s manual covers this. If a materials figure looks too high, the contractor can estimate it, the same as when there are no receipts. So a re-split invoice goes through the same five steps for CIS on materials.

If the subcontractor, or their accountant, disagrees

Both sides can check the same HMRC pages, listed at the end. Questions to work through together on CIS on materials:

  • What did the subcontractor actually pay for the materials, and can they show it?
  • Did you supply or pay for any of the materials?
  • Is there a mark-up in the materials figure?
  • If there are no receipts, how was the estimate worked out, and is it written down?

This matters to the contractor. If CIS should have been taken off and wasn’t, the contractor still has to pay that amount to HMRC (CIS 340, section 4.12).

Where the VAT reverse charge fits in

If you’re both VAT registered, the invoice may say “reverse charge”. That is a VAT rule, not a CIS rule. HMRC says it “is not part of the Construction Industry Scheme” (VATREVCON21000).

Three things to know:

  • It covers the whole invoice, materials included, even where CIS only comes off the labour (VATREVCON23000).
  • Labour and materials can’t be split up just to get round it.
  • An invoice with reverse charge on it still needs the CIS on materials check.

So every invoice gets two separate checks:

  1. VAT: should the reverse charge apply? If it does, the invoice should say something like “Customer to pay the VAT to HMRC”.
  2. CIS: what did the subcontractor pay for materials, and what’s the CIS on the rest?

For when the reverse charge does and doesn’t apply, see HMRC’s reverse charge guidance.

The deadlines that go with it

The CIS on materials figure goes into your monthly CIS paperwork, so these dates apply:

  • Payment and deduction statements: to each subcontractor by the 19th of the month.
  • Monthly return: must reach HMRC by the 19th. For 6 September to 5 October 2026, that’s Monday 19 October 2026.
  • Paying HMRC: by the 19th, or the 22nd if you pay electronically.
  • Late return penalties: £100 the day after the deadline, another £200 at two months, then £300 or 5% of the CIS on the return (whichever is higher) at six months, and again at twelve months.

These dates are in the CIS 340 guide, sections 4.2, 4.12 and 4.18.

If you’re new to paying subcontractors, see when do you need to register as a CIS contractor.

CIS on materials: a quick checklist

Before you pay, run through these CIS on materials checks:

  1. Is the materials figure what the subcontractor paid, without a mark-up?
  2. Did they buy the materials themselves for this job?
  3. Do you have receipts, or a written note of your estimate?
  4. Is the materials figure on the payment and deduction statement?
  5. Have you checked the VAT reverse charge separately?

This is general information, not advice on your own position. How the rules apply depends on your circumstances and the contract, so check the HMRC guidance linked here or take advice on your own situation before acting.

Brickbooks and Payroll Ltd, company number 14528647, licensed and regulated by the AAT, registered Authorised Corporate Service Provider (ACSP) with Companies House.

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