Construction Industry Scheme (CIS) Pricing & Tax Basics.
The Construction Industry Scheme (CIS) requires UK main contractors to deduct tax from payments to subcontractors and remit it to HMRC. Estimators must separate labor from material components when assessing subcontractor quotes to ensure correct CIS and VAT treatment.
Authored by Alexandr Vreme | Reviewed by Maksym Vasylkov
Published — Next review
Who this guide is for
Contractors, subcontractors, and commercial accountants. Scope: UK-wide.
CIS Deduction Rates
- Gross Payment Status: 0% deduction (registered subbies meeting HMRC turnover checks).
- Standard Registered Status: 20% tax deduction on the labor element only (materials paid in full).
- Unregistered Status: 30% tax deduction on labor element.
Reverse Charge VAT Consideration
Under Domestic Reverse Charge VAT rules, VAT-registered contractors pricing CIS-eligible services do not pay VAT to their subcontractors; instead, they account for it directly on their VAT return.
Miniature Example
A subcontractor submits a £3,000 quote (£2,000 labor + £1,000 materials). Under 20% CIS, the main contractor pays £1,000 materials + £1,600 net labor = £2,600 to the subbie and remits £400 CIS tax to HMRC.
Primary Sources & Further Reading
Official reference sources: GOV.UK Building Regulations, Legislation.gov.uk, and HSE CDM 2015 Guidance.
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