For CIS deductions, materials are the direct cost of materials the subcontractor supplied for the construction work, subject to HMRC’s detailed rules. They are excluded before the contractor applies the CIS rate; labour, profit and general overhead are not turned into materials by putting them on a different invoice line.
This is general information, not tax advice. Use HMRC’s current CIS guide for the exact treatment of a real payment.
What counts as materials for CIS deductions?
The contractor starts with the gross payment, then excludes VAT and qualifying materials before applying the verified deduction rate.
Typical records may include direct costs for:
- building materials incorporated into the work
- consumable materials used for the work
- fuel used for plant or machinery, but not general travel
- plant hire and manufacture where HMRC’s specific rules allow
The exact treatment depends on who paid, what was supplied and how the contract is structured.
Basic CIS materials example
A subcontractor invoices:
| Item | Amount |
|---|---|
| Labour | £3,000 |
| Materials supplied | £1,200 |
| Gross before VAT | £4,200 |
At 20%, the contractor deducts £600 from the £3,000 labour base. The payment before any normal VAT collected is £3,600.
The CIS invoice worked example shows 0%, 20% and 30% results.
Use the subcontractor’s actual cost
HMRC’s CIS guidance focuses on the cost to the subcontractor of materials used in the construction work. Do not inflate the materials figure with profit or an allocation of labour.
Keep:
- merchant invoices
- delivery notes
- hire invoices
- fuel records linked to plant
- calculation for manufactured items
- subcontract and variation records
The contractor may ask for evidence before excluding the amount.
Labour is not a material
These remain labour or part of the non-material payment:
- wages and subcontract labour
- project management time
- travel time
- design or supervision included in your package
- profit margin
- general office overhead
A lump-sum package still needs a supportable materials calculation if the contractor is to exclude part of it.
Customer-supplied materials
If the contractor or customer bought the materials directly, they are not part of the payment to you. Do not add them to your CIS materials line.
Your invoice may then be labour-only, even though materials were used on site.
Plant hire
Plant hire has detailed CIS rules. Treatment can differ depending on whether the plant belongs to the subcontractor, is hired from a third party or comes with an operator.
Do not assume every hire invoice is fully excluded. Check HMRC’s CIS guide and retain the hire evidence.
Fuel and travel
Fuel used directly in plant or machinery for the construction work can be treated differently from fuel used to travel to site.
Keep records that identify the machine and job. A general monthly fuel-card total does not show the amount used for the relevant construction operation.
Manufactured or prefabricated items
When a subcontractor manufactures an item before installation, HMRC’s calculation can separate eligible material costs from labour, overhead and profit.
Keep the bill of materials and cost build-up. Do not use the full selling price of the manufactured item as the materials exclusion without checking the rule.
VAT is excluded separately
CIS is calculated without VAT. Remove VAT from the deduction calculation before applying the rate.
Under normal VAT, the subcontractor may still collect VAT in cash. Under the VAT domestic reverse charge, the customer accounts for the VAT instead. The reverse charge invoice example keeps the two calculations separate.
What should appear on the invoice?
Show clear lines for:
- labour
- materials supplied
- plant or hire
- VAT treatment
- CIS deduction base
- verified CIS rate
- deduction
- net amount due
The contractor remains responsible for making the CIS calculation correctly. Your breakdown gives them the evidence needed to do it.
Disputing a materials deduction
If the contractor excludes less than you expected, compare:
- your invoice breakdown
- merchant or hire evidence
- subcontract terms
- HMRC’s materials rules
- the payment and deduction statement
Do not rewrite the issued invoice to force the bank payment to match. Resolve the calculation and issue any proper correction separately.
CIS materials checklist for 2026
- Did the subcontractor pay for and supply the materials?
- Were they used for the construction work?
- Is the figure the relevant cost rather than selling price?
- Are labour, profit and overhead excluded?
- Is plant, fuel or manufacture treated under the specific rule?
- Are VAT and CIS calculated separately?
- Is evidence retained?
- Does the deduction statement match the final calculation?
Sendinvo’s CIS invoice screen lets you enter the labour figure and displays the gross total, deduction and net amount due. It does not decide which costs count as materials.