CIS & Tax: Keep the Right Receipts
CIS deductions are advance payments towards tax, not a discount on your work. The contractor's deduction statement is the record you need alongside the invoice and bank payment.
A simple registered-subcontractor example
| Illustrative invoice, with no VAT | Amount |
|---|---|
| Labour | £800 |
| Qualifying materials paid for by you | £200 |
| Invoice total | £1,000 |
| 20% deduction on the £800 balance | −£160 |
| Paid to you | £840 |
Under the normal calculation, the contractor removes VAT and qualifying materials and other allowed costs before applying the deduction. The registered rate is normally 20%; unregistered subcontractors normally face 30%. Gross payment status is a separate approval.
When the payment looks short
Match the bank amount to the statement before assuming the customer has underpaid. In the example, £840 cash plus £160 CIS deduction accounts for the £1,000 invoice. Ask for a missing statement so the tax credit is recorded correctly.
Keep the evidence where you already keep invoices
Save the statement with that invoice and capture material receipts when you buy. CIS already deducted is taken into account in the tax calculation; setting aside another fixed percentage of every invoice can give the wrong picture.
Sources: HMRC's CIS overview and deduction calculation. VAT and filing duties remain separate.
Updated 29 October 2026 · Report a factual error