CIS Tax Deduction Calculator — How Much CIS Tax Will Be Deducted?

This calculator works out the CIS tax deduction that a contractor must withhold from a subcontractor payment, based on the gross payment amount (excluding VAT), CIS registration status, and the materials and other qualifying costs that are excluded from CIS.

HMRC Calculation Order

HMRC requires the contractor to remove certain amounts before applying the CIS rate. All figures are excluding VAT:

1. Take away VAT — VAT is never subject to CIS
2. Take away qualifying costs — materials, plant hire, fuel for plant (not travel), consumable stores, prefabrication
3. Taxable labour = Gross payment (ex-VAT) - qualifying costs
4. CIS deduction = Taxable labour x CIS rate
5. Net payment = Gross payment (ex-VAT) - CIS deduction, plus VAT only where the reverse charge does not apply

Since 1 March 2021 the VAT domestic reverse charge applies to most CIS construction services between VAT-registered businesses: the contractor accounts for the VAT to HMRC, so the subcontractor does not receive it. VAT is only added to the subcontractor’s net payment where the reverse charge does not apply (end user, non-VAT-registered customer, or an excepted service).

CIS Deduction Rates

• Registered (verified): 20%
• Not registered / unverified: 30%
• Gross payment status: 0%

Example

A registered subcontractor invoices £5,000 for labour and materials (excluding VAT), of which £1,000 is materials. Taxable labour = £5,000 - £1,000 = £4,000. CIS deduction = £4,000 x 20% = £800. Net payment received = £5,000 - £800 = £4,200. If the work falls under the VAT reverse charge (the usual case between VAT-registered businesses), no VAT is added — the contractor accounts for it. VAT is only added on top where the reverse charge does not apply.

Reference

HMRC Construction Industry Scheme (CIS) — gov.uk/what-you-must-do-as-a-cis-contractor/make-deductions-and-pay-subcontractors