How to pay CIS subcontractors UK (2026): verify, 20%/30%, invoice vs CIS300
How to pay CIS subcontractors UK (2026): verify, 20%/30%, invoice vs CIS300
By InvoiceAdept Editorial27 April 2026Updated 30 August 202613 min read
How to pay CIS subcontractors UK (2026): verify, 20%/30%, invoice vs CIS300
If you hire other trades on UK construction work, you are usually the CIS contractor. Your job is not to raise an invoice at the subcontractor. Your job is to register, verify them with HMRC before the first payment, take the right deduction off the right part of their bill, pay them the net, give them a payment and deduction statement, and file the monthly return (often called CIS300) with HMRC.
This page is the contractor guide. The complementary subcontractor guide — what they put on the invoice they send you — is How to invoice as a CIS subcontractor UK (2026). Keep both tabs open if you wear both hats on different jobs.
An older stub on this URL told contractors to put a UTR and CIS deduction on “your invoice”, walked through a £1,000 lump with no labour/materials split, mixed personal allowance into CIS, and muddled who offsets deductions. Those errors are fixed below. InvoiceAdept does not file CIS300, VAT returns, Self Assessment, or Making Tax Digital updates to HMRC. Pro+ helps a subcontractor print CIS-shaped invoice lines. The contractor’s monthly return stays with HMRC’s CIS online service, commercial CIS software, or your accountant.
InvoiceAdept is invoicing software from Tech Me Today Ltd, Companies House 15917255, ICO ZB944663. Free is five invoices a month. Pro is £7.99. Pro+ is £12.99 and includes CIS invoice lines. Pricing. Figures in the tables are worked examples, labelled as such. This is general information for UK trades, not tax, legal or accounting advice. Check the GOV.UK pages linked throughout.
In short (contractor checklist)
Decide whether you are a CIS contractor (you pay subcontractors for construction work — including many small builders).
Register for CIS with HMRC before you take on your first subcontractor.
Check employment status: some “subbies” should be on PAYE.
Verify before the first payment; match legal name and UTR exactly; HMRC returns 20%, 30%, or 0% (gross).
Pay against their invoice. Split labour and materials. Deduct CIS only from the CIS base (not VAT, not qualifying materials).
Issue a payment and deduction statement within 14 days of the end of the tax month if you deducted.
File the monthly return and pay deductions to HMRC — you do this, not InvoiceAdept.
Keep records. Domestic reverse charge is a separate VAT rule — see domestic reverse charge invoice UK.
Who is a CIS contractor (including “small” builders)
Under the Construction Industry Scheme, contractors deduct money from a subcontractor’s payments and pass it to HMRC. Those deductions are advance payments towards the subcontractor’s tax and National Insurance — not an extra tax you invent on your own books.
GOV.UK, what you must do as a CIS contractor: register if either you pay subcontractors for construction work, or your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment.
You may be a sole trader, partnership, or limited company. Mainstream contractors include building firms that pay other trades, property developers, and gang leaders organising labour. Private householders paying you to extend their kitchen are not CIS contractors — so when you invoice a homeowner you do not put CIS on that bill. Use how to invoice a client (UK tradesperson) and the builder invoice template for client-facing invoices.
“I’m only a small builder” does not get you out. If you pay a plasterer, electrician, or labour-only subbie for construction operations in the UK, you are in the scheme as a contractor for those payments. Register before the first payment.
You can be both contractor and subcontractor on different jobs. When a main contractor pays you, follow the subcontractor invoice guide. When you pay others, this page applies.
Situation | Are you a CIS contractor for that payment? |
|---|---|
You pay a self-employed electrician to first-fix a commercial site you are main-contracting | Yes |
You pay a labour-only brickie on a house build you are delivering | Yes |
A homeowner pays you to renovate their bathroom | No — they are not a contractor; you invoice them without CIS |
A non-construction business has spent over £3m on construction in 12 months and pays you | They may be a deemed contractor — they operate CIS on you |
You only hire scaffolding with no labour | Often outside CIS for that hire — check what is CIS exceptions |
Verify before first payment: 20 / 30 / 0
Verification is your duty as contractor. It is not the same as the subcontractor registering for CIS.
GOV.UK, verify subcontractors:
Before you can pay a new subcontractor, verify them with HMRC.
HMRC tells you whether they are registered and which deduction rate to use, or whether you can pay without deduction (gross payment status).
Re-verify if you have not included them on a CIS return in the current or last two tax years.
Use the free HMRC CIS online service or commercial CIS software. More than 50 subcontractors to verify → commercial software.
What you need (exact match to how they registered):
Subcontractor type | Details you must use to verify |
|---|---|
Sole trader | UTR and National Insurance number (not temporary numbers starting TN) |
Limited company | Company name, company UTR, company registration number |
Partnership | Nominated partner details, trading name, partnership UTR |
Plus your own UTR, HMRC accounts office reference, and employer reference. HMRC sets the rate. A trading name that does not match the registered legal name is a classic path to 30%.
Status after verification | Rate | What you do |
|---|---|---|
Registered, net payment | 20% | Deduct 20% of the CIS base; pay the rest; pay the deduction to HMRC |
Not registered / cannot verify | 30% | Deduct 30% of the CIS base |
Gross payment status | 0% | Pay without CIS deduction; still report the payment on the monthly return |
Keep the verification reference HMRC gives you. For higher-rate (30%) deductions you must show that reference on the payment and deduction statement and on the monthly return. Also check employment status. Wrong employment status declared on the monthly return can attract a penalty of up to £3,000 — file your monthly returns.
The subcontractor’s invoice is not the CIS300
Two documents. Do not mash them together.
Document | Who creates it | Purpose |
|---|---|---|
Subcontractor’s invoice | The subcontractor | Bills you for the work: labour, materials, VAT or reverse charge, UTR, description, site |
Payment and deduction statement | You (the contractor) | Confirms gross, materials taken out, CIS deducted, net paid — within 14 days of tax month end if you deducted |
Monthly CIS return (CIS300) | You file with HMRC | Lists payments and deductions for the tax month; due by the 19th following the tax month |
Your invoice to your client | You (to the developer / client / householder) | Separate commercial document — CIS deductions from subbies do not live on it as a bill “to” the subbie |
You do not invoice the subcontractor for CIS. You do not put their UTR on an invoice you send them. They raise the invoice. You withhold from the payment and issue the statement. That is the correction to the old stub on this URL.
What you need on their invoice so you can deduct correctly: legal name matching verification; your name and the site or purchase order; unique invoice number and dates; description of the work; labour and materials split; their 10-digit UTR; VAT or reverse-charge wording if VAT-registered; optionally the expected CIS rate (HMRC’s verification rate wins if it differs).
If they send one lump with no materials split, you may have to estimate materials (ask for receipts). Point them at how to invoice as a CIS subcontractor. For software that prints CIS lines: CIS invoices feature and best CIS invoice software UK 2026.
Many UK tradespeople also find it helpful to review VAT invoice requirements UK 2026 at this stage.
How to calculate the deduction (labour vs materials)
From GOV.UK, make deductions and pay subcontractors:
Start with the gross amount of the subcontractor’s invoice.
Take away VAT, consumable stores, fuel used (except travelling), plant hired for this job, manufacturing/prefabricating materials, and materials only if they paid for them directly.
Apply 20%, 30%, or 0% to what is left.
Pay them the net. Pay the deduction to HMRC.
Materials you issued from your own stores are not their materials. Mark-up stuffed into “materials” is not materials. Travelling and subsistence stay in the amount subject to deduction. Employment businesses / labour-only payments are almost all CIS base after VAT — still verify, statement, and return. Check agency and off-payroll rules carefully.
Payment and deduction statement
If you make deductions, give the subcontractor a payment and deduction statement within 14 days of the end of each tax month. Example from GOV.UK: tax month 6 May to 5 June → statement by 19 June.
Include your name and employer tax reference; tax month end (or payment date); subcontractor name and UTR; verification reference if higher-rate; gross amount; materials that reduced the base; deduction amount. Electronic statements are fine if both agree and they can store and print. Mark duplicates “Duplicate”.
Monthly CIS300: you file it with HMRC — not InvoiceAdept
The monthly return tells HMRC who you paid, how much, and what you deducted. Industry usage and HMRC manuals call this the CIS300. File through the free HMRC CIS online service, commercial CIS software, or your accountant.
InvoiceAdept does not file CIS300. It does not file VAT, Self Assessment, or MTD. Do not buy Pro+ expecting a contractor return button. Pro+ is for CIS-shaped invoices when you (or your subbie) are billing under the scheme.
GOV.UK, file your monthly returns: send returns by the 19th following the tax month (example: 6 May–5 June → 19 June). Declare subcontractors are not employees. Use a nil return or inactivity request if you made no payments.
How late the return is | Penalty (GOV.UK) |
|---|---|
1 day late | £100 |
2 months late | £200 |
6 months late | £300 or 5% of the CIS deductions on the return, whichever is higher |
12 months late | £300 or 5% of the CIS deductions on the return, whichever is higher |
For returns later than this, GOV.UK says you may be given an additional penalty of up to £3,000 or 100% of the CIS deductions, whichever is higher. Paying deductions: CIS 340 states payment within 14 days of month end, or 17 days if electronic (commonly by the 19th, or 22nd electronic). Confirm current routes on GOV.UK.
Who “offsets” CIS — do not muddle contractor and subcontractor
The old stub said contractors can offset CIS deductions against tax liabilities. That muddles two roles.
As contractor: you withhold CIS from subcontractors and pay those amounts to HMRC. You do not keep them as a personal tax credit for being a contractor.
As subcontractor (especially a limited company): CIS deductions suffered on money paid to you can, under CIS 340, be set off by the company against PAYE / NIC / Student Loan / CIS you owe as an employer — shown on the EPS. That is a subcontractor-company mechanism.
Sole-trader subcontractors reclaim excess CIS through Self Assessment if more was deducted than tax due.
If you are both, keep the hats separate.
If you are sorting this alongside other compliance work, read Best CIS invoice software UK 2026.
Domestic reverse charge is VAT — not CIS
CIS withholds income tax / Class 4 NIC on account. Domestic reverse charge moves VAT accounting onto the customer’s VAT return when HMRC’s conditions are met. Both can appear on the same subcontractor invoice. Short pointer: domestic reverse charge invoice UK. Private householders are not VAT-registered customers for reverse charge. VAT registration threshold is £90,000 of taxable turnover (not the outdated the old VAT threshold figure). InvoiceAdept does not decide end-user status for you.
Worked example (illustrative): labour vs materials, 20%
Labelled illustrative numbers — not a quote or price list.
You are a main contractor. You verified a self-employed plumber at 20%. Their invoice for a commercial first-fix:
Line on subcontractor’s invoice | Amount |
|---|---|
Labour | £2,400.00 |
Materials they bought for this job (receipts held) | £600.00 |
Subtotal (VAT-exclusive) | £3,000.00 |
VAT at 20% (assume they charge VAT; reverse charge not applying on this example) | £600.00 |
Invoice total | £3,600.00 |
Your CIS calculation (GOV.UK steps):
Step | Amount |
|---|---|
Gross invoice for CIS starting point | £3,000.00 (exclude VAT from the deduction base) |
Less materials they paid for directly | −£600.00 |
CIS base (labour) | £2,400.00 |
CIS deduction at 20% | −£480.00 |
You pay the subcontractor | £3,000.00 − £480.00 + £600.00 VAT = £3,120.00 |
You pay HMRC (CIS) | £480.00 |
Compare the wrong lump-sum habit (£1,000 × 20% with no split): if this plumber had billed “job £3,000” with no materials line and you deducted 20% of £3,000 = £600, you would have taken £120 too much off materials.
Same job, rate variant | CIS on £2,400 labour | You pay subbie (incl. VAT £600 where charged) | You pay HMRC CIS |
|---|---|---|---|
Verified 20% | £480 | £3,120 | £480 |
Unverified 30% | £720 | £2,880 | £720 |
Gross payment 0% | £0 | £3,600 | £0 (still report) |
Reverse-charge variant: show VAT £600 but do not add it to what you pay; CIS still £480 on labour; you pay £2,520 to the subbie. Full walkthrough: domestic reverse charge.
Employment businesses, labour-only, and genuine materials
Labour-only subcontractors: almost everything after VAT is in the CIS base. Still verify, statement, monthly return.
Supply-and-fix with genuine merchant receipts: strip materials before applying the rate.
Agency / employment business supplying workers under a contract with you: the agency is often the subcontractor you verify and report. Check CIS 340 on agencies and off-payroll rules.
Your own employees: CIS does not apply to contracts of employment. Use PAYE.
How InvoiceAdept helps (and what it does not do)
Free | Pro £7.99 | Pro+ £12.99 | |
|---|---|---|---|
Invoices per month | 5 | Unlimited | Unlimited |
CIS labour / materials / 0–20–30 lines on invoices you raise | No | No | Yes |
Files CIS300 for you as contractor | No | No | No |
Files VAT / SA / MTD to HMRC | No | No | No |
When you are the subcontractor on another site, Pro+ helps you raise a CIS-shaped invoice. When you are the contractor paying subbies, you still verify, deduct, statement, and file outside InvoiceAdept. InvoiceFree includes CIS on its free plan — an honest difference. More: best CIS invoice software UK 2026. MTD records context: InvoiceAdept MTD invoicing for trades.
Related: see How to invoice for the first time UK for practical next steps.
Mistakes that used to sit on this page (and similar stubs)
Telling contractors to put UTR and deduction on their invoice to the subbie — backwards.
Implying InvoiceAdept submits the monthly CIS return — it does not.
Padding with personal allowance £12,570 — irrelevant to contractor CIS deductions.
Deducting 20% of a round lump with no labour/materials split — classic error.
Saying contractors “offset CIS deductions against tax liabilities” without separating contractor remittance from subcontractor set-off.
Any claim that InvoiceAdept files to HMRC — false.
Also avoid: decorating homeowner invoices with CIS; reverse-charging private householders; using an outdated VAT threshold instead of £90,000.
Records you should keep as a contractor
HMRC can inspect CIS records in a similar way to PAYE. Keep, for each payment: the gross amount excluding VAT, the materials cost you excluded, the deduction, the verification outcome and reference where relevant, and copies of payment and deduction statements. CIS 340 expects records to be available on request and retained for at least three years after the end of the tax year to which they relate. Optical imaging of paper originals is acceptable if the image is complete and unaltered.
Match each subcontractor invoice to the bank payment and to the line on your monthly return. If you discover an error after filing, amend through the same channel you used to file (HMRC CIS online or your commercial software). Do not rely on InvoiceAdept to store or submit the CIS300 — it is invoicing software, not your contractor return tool.
If you know you will not pay subcontractors for up to six months, you can ask HMRC to make the scheme inactive so returns are not chased for that window. When you start paying again, file as normal. A nil-payment month still needs a nil return or an inactivity request for mainstream contractors — silence attracts penalties under the GOV.UK rules cited above.
Worth pairing this with our guide to Proforma invoice vs tax invoice UK.
Frequently asked questions
Do I invoice my subcontractors under CIS?
No. They invoice you. You verify, deduct from the payment, issue a deduction statement, and file the monthly return with HMRC.
What rate do I deduct — 20%, 30%, or 0%?
Whatever HMRC tells you at verification. Registered net = 20%. Unregistered / cannot verify = 30%. Gross payment status = 0%. You still report gross-status payments.
Do CIS deductions apply to materials?
Not if you are satisfied the subcontractor paid for them directly. Strip VAT, qualifying materials, plant hire for the job, consumable stores, and on-site fuel (not travelling) before applying the rate — make deductions.
Is the subcontractor’s invoice the same as the CIS300?
No. The invoice is their bill to you. The CIS300 (monthly return) is what you file with HMRC listing payments and deductions.
Does InvoiceAdept file my CIS300?
No. Never. Use HMRC CIS online, commercial CIS software, or your accountant. InvoiceAdept Pro+ prints CIS lines on invoices; it does not file returns.
When is the monthly return due?
By the 19th of the month following the tax month — file your monthly returns. Example: 6 May–5 June → 19 June.
What are the late filing penalties?
GOV.UK states £100 at 1 day late, £200 at 2 months, then £300 or 5% of CIS deductions (whichever higher) at 6 and 12 months, with possible further penalties up to £3,000 or 100% of deductions. Cite GOV.UK; do not invent other figures.
What must go on the payment and deduction statement?
Your name and employer reference, tax month (or payment date), subcontractor name and UTR, gross, materials excluded, deduction amount, and verification reference for higher-rate cases — within 14 days of tax month end if you deducted.
Can I be a CIS contractor and a CIS subcontractor?
Yes. Many small builders are both. Use this page when you pay others; use the subcontractor twin when others pay you.
Does reverse charge replace CIS?
No. Reverse charge is VAT. CIS is a deduction on account of income tax / NIC. They can both apply — see domestic reverse charge invoice UK.
What if my subcontractor sends one lump sum?
Ask for a labour/materials split and receipts. If evidence is missing, estimate materials carefully. Overstated materials can leave you liable for under-deduction.
Where do I register as a contractor?
Follow what you must do as a CIS contractor — register before the first subcontractor.
About this guide
InvoiceAdept is invoicing software for UK trades, operated by Tech Me Today Ltd, Companies House 15917255, ICO registration ZB944663. We help you raise invoices, including CIS lines on Pro+. We do not file your CIS300, your VAT return, your Self Assessment, or Making Tax Digital updates to HMRC.
Primary cross-link for subcontractors raising the bill: How to invoice as a CIS subcontractor UK (2026).
Last reviewed: 30 August 2026. Tax rules change. Check the GOV.UK pages linked above before you rely on a rate, deadline, or form of words.
This guide is general information for UK tradespeople. It is not tax, legal or accounting advice.
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