What counts as materials under CIS
CIS is deducted from the labour element of a payment and nothing else. Getting the materials figure wrong is the most common error in the whole scheme, and it always costs the subcontractor rather than the contractor.
Updated 10 September 2026 · Tax year 2026/27
The CIS materials rule in one line #
Take the cost of CIS materials out of the payment first, then apply 20% or 30% to what is left.
A £2,500 invoice with £500 of materials. Only the green band is deducted from, which is why the answer is £400 and not £500.
What comes out before the deduction #
| Cost | Deducted from? | Notes |
|---|---|---|
| Materials the subcontractor bought | No | Timber, cable, plaster, fixings, anything consumed in the work |
| Plant hire | No | Only where the subcontractor incurred the hire cost |
| Consumable stores | No | Used up during the job: blades, abrasives, sealant |
| Fuel for plant | No | Fuel to run machinery on site |
| Fuel for travelling | Yes | Getting to and from site is not a material cost |
| Manufacturing and prefabrication materials | No | Materials used to make something off site for the job |
| VAT | No | Always excluded, at any rate |
| Labour | Yes | This is the only thing CIS is deducted from |
What it costs to get it wrong #
A subcontractor invoices £2,500, made up of £2,000 labour and £500 materials, at the 20% rate.
| Correct | Materials ignored | |
|---|---|---|
| CIS applies to | £2,000 | £2,500 |
| Deduction at 20% | £400 | £500 |
| Subcontractor receives | £2,100 | £2,000 |
£100 on one invoice. Across a year of similar work that is a serious sum sitting with HMRC until the tax return is filed. Run your own figures through the calculator.
The materials figure must be the real cost #
The amount excluded is what the subcontractor actually paid, not what they charged the contractor. If materials cost £500 and were invoiced on at £600, only £500 comes out of the CIS calculation. The £100 mark-up is treated as part of the labour element.
A contractor who thinks the materials figure has been inflated is expected to challenge it. Keeping receipts is the answer to that, and it is worth doing anyway for your own expenses claim.
VAT on materials #
Which figure to use depends on whether the subcontractor can recover the VAT.
- VAT-registered subcontractor: use the cost excluding VAT, because the VAT is reclaimable and was never a real cost to them.
- Not VAT registered: use the cost including VAT, because that is what they actually paid.
Plant: who paid for it matters #
Hired plant is excluded only where the subcontractor incurred the cost. If the contractor supplied the plant, there is no cost for the subcontractor to exclude, and it does not come out of the calculation.
Plant the subcontractor already owns is also not excluded. There is no hire cost, so nothing to take out. Depreciation and running costs go through the annual expenses claim instead, not the CIS calculation.
Common mistakes #
- Applying the rate to the whole invoice because it arrived as one figure
- Excluding the marked-up price of materials rather than the real cost
- Excluding travel fuel, which is not a material cost
- Excluding plant the contractor supplied
- Calculating the deduction on the VAT-inclusive total
What to do about it #
Split labour and materials on the invoice itself, as separate lines. It removes the ambiguity, it makes the contractor's job easier, and it leaves a record if the deduction is later questioned.
If a deduction has already been taken on the wrong figure, the correction happens through Self Assessment. The over-deduction is still credited to you, it just sits with HMRC until you file. Claiming your CIS refund.
Common questions #
Is CIS deducted from materials?
No. CIS materials are taken out of the payment before the deduction rate is applied. Only the labour element is deducted from.
Do I use the VAT-inclusive or VAT-exclusive cost of materials?
Use the cost excluding VAT if the subcontractor is VAT registered, because the VAT is reclaimable. Use the cost including VAT if they are not registered, because that is what they actually paid.
Can I exclude the price I charged for materials or the price I paid?
The price you paid. If materials cost £500 and were invoiced on at £600, only £500 is excluded. The £100 mark-up is treated as part of the labour element.