Under the Construction Industry Scheme, contractors deduct money from a subcontractor’s payment for labour and pass it to HMRC as an advance towards the subcontractor’s tax. When you self-bill a subcontractor, the deduction is applied to the labour element and the net amount payable is shown. CIS deductions are separate from VAT.
Key points
- Typical rates: 20% registered, 30% unverified, 0% gross status.
- Applied to the labour element, not materials or VAT.
- The net amount payable to the subcontractor is shown.
- Separate from VAT and the reverse charge.
The deduction rates
CIS deductions are commonly 20% for registered subcontractors, 30% for those not verified/registered, and 0% for subcontractors with gross payment status. The deduction applies to the labour element, not to materials, and not to VAT.
How it shows on a self-billed invoice
On a self-billed invoice, the net and any VAT are shown, and the CIS deduction is subtracted to give the amount actually payable to the subcontractor. Apex Billing calculates the deduction and shows the net payable clearly.
CIS deductions vs VAT
The two are independent. VAT (or the reverse charge) is accounted for under the VAT rules; the CIS deduction is a withholding towards the subcontractor’s tax. Both can appear on the same construction invoice.
This is general information, not tax advice — confirm your own position with your accountant or HMRC (see VAT Notice 700/62 on self-billing).