How to invoice under CIS: labour, materials and the deduction

What is a CIS deduction?

Money a contractor holds back from what they pay you and sends to HMRC on your behalf. It comes off your labour and nothing else, which is why a CIS invoice's real job is keeping labour and materials apart.

The Construction Industry Scheme covers payments from contractors to subcontractors for construction work. GOV.UK's guide for subcontractors, read on 25 September 2026, sets the rate by whether you are registered:

Your UTR, the Unique Taxpayer Reference, is the ten-digit number HMRC gives you when you register for Self Assessment. Gross payment status is something you apply for, and with it nothing is deducted and you pay your own tax in the usual way.

The deduction comes off your labour. Everything else on the invoice is there to make that figure right.

None of it is lost. HMRC counts the deductions as advance payments towards your tax and National Insurance, and they come off your bill at the end of the year.

Which parts of my invoice are deducted from?

Only your labour. GOV.UK's list of what does not count as your pay is short, and every item on it is something you should show on its own line. The contractors' guide adds fuel used on the job.

The line that decides it is the materials. The contractor can ask for evidence of what you paid for them, and GOV.UK says that if you have no evidence, the contractor will estimate the cost. An estimate made by the person paying you is not usually the generous one.

What goes on a CIS invoice?

An ordinary invoice with the labour and the materials in separate sections, each with its own subtotal. Many subcontractors add the deduction and the amount they expect to receive, so the figure is written down before the money arrives.

There is no special CIS form of invoice. The contractor's side of the scheme, in GOV.UK's guide for contractors, asks them to work the deduction out from your invoice and keep a record of the materials you billed. So the invoice is what they calculate from, and a clear split is what makes their number match yours.

A CIS invoice example

A fictional plasterer, registered for CIS and verified, invoices a contractor £1,500 of labour and £500 of materials. The deduction is 20% of the labour: £300. Nothing comes off the materials.

If you are VAT registered, the same job is almost always under the VAT reverse charge as well, because the payment is reported under CIS. Then there is no VAT in the amount payable either, and the reverse charge wording goes on the invoice beside the deduction.

Afterwards: the statement

Within 14 days of the end of each tax month, the contractor has to give you a payment and deduction statement showing what they paid you and what they deducted. Keep every one. They are what your tax return is built from, and if one goes missing, ask the contractor for a replacement.

How do I write a CIS invoice in Invoice Koi?

Put the labour and the materials in two sections, so each prints with its own subtotal. Then show the deduction one of two ways, depending on whether there are materials on the invoice.

Two sections

Give each line a section, "Labour" or "Materials", and the PDF prints each section's heading with its subtotal beside it. That is the split the contractor calculates from, written on the document rather than left for them to guess.

All labour: let the invoice take it off

Turn on "Clients withhold tax" in your business details and set the rate to 20%, or 30% if that is what you are paid at. Each invoice you create after that carries a withholding line, worked out on the fee after any discount and before VAT, and ends in the amount you will actually receive. It prints as "Withholding (20%)": the label is the app's, not HMRC's.

Labour and materials: write it in the note

With materials on the invoice, leave withholding off and put the deduction in "Note on the invoice": "CIS deduction at 20% of labour (£1,500.00): £300.00. Amount payable: £1,700.00." The note prints on the PDF below the totals.

When the money arrives

Record the contractor's payment against the invoice as it lands. If you want the invoice to read as settled, record the deduction as a second payment, with the method set to Other and "CIS deduction" in its details, dated when the statement arrives. How the deduction is treated in your accounts is a question for whoever does your books.

The rest of the document is the ordinary invoice, and the sole trader invoice guide goes through it. For the trades that invoice contractors most: builders, plasterers and electricians.

Asked on site