If you work in UK construction as a subcontractor, the Construction Industry Scheme deducts tax at source from your invoices before you receive payment — 20% if you're registered with HMRC, 30% if you're not. The deduction reduces your in-year cash flow but is offset against your eventual Corporation Tax or Self Assessment bill. 4invoices handles the CIS mechanics so your invoices show the right net amount and your monthly returns to HMRC are accurate.
Calculating the CIS deduction correctly
CIS deducts a percentage from the labour portion of the invoice, not the materials portion. Materials supplied by the subcontractor (genuine cost plus reasonable markup) are exempt. 4invoices splits each invoice into labour and materials lines, computes the CIS deduction on the labour total, and shows the net payable amount the contractor will actually pay.
Monthly CIS returns by the 19th
Contractors must file a monthly CIS return to HMRC by the 19th of the following month, listing all payments to subcontractors with the deductions made. As a subcontractor, you don't file this return — your contractor does. But 4invoices generates the data your contractor needs from your invoices, in the format HMRC's CIS portal accepts.
Year-end — recovering the CIS deductions against your tax bill
All the CIS deducted from your invoices throughout the year sits as a credit against your eventual tax bill. At year-end, the platform produces a CIS statement showing the total deducted, by contractor, ready for your accountant to claim against Corporation Tax (limited companies) or Income Tax (sole traders). For limited companies, CIS can also be reclaimed quarterly via EPS — we'll surface that schedule if relevant.
CIS in practice — the bits that catch people out
The contractor-subcontractor relationship in UK construction is one of the most regulated in the economy. CIS exists because, historically, mobile subcontractors in construction were difficult for HMRC to track, leading to widespread tax avoidance. The scheme makes the contractor responsible for withholding tax from payments and passing it to HMRC — turning what would be a self-employed tax compliance problem into a payroll-style withholding scheme.
As a subcontractor, you need to verify your CIS status with HMRC. Registered subcontractors pay 20% deduction. Unregistered ones pay 30%. Gross-payment status (no deduction) is available for subcontractors who meet turnover and compliance criteria — typically larger, established players. 4invoices checks your CIS status during onboarding and applies the right rate.
Materials are the area most disputes arise. Genuinely-bought materials supplied to the contractor are CIS-exempt, but markup beyond a reasonable level (HMRC interprets this loosely as cost + small profit margin) gets pulled into the labour calculation for CIS purposes. Our invoice templates separate materials from labour explicitly, with a tracking field for purchase receipts (you can attach the supplier invoice for each material line). Audit-ready if HMRC asks.
Frequently asked
What if I'm both a contractor and a subcontractor?
Common in UK construction — a tier-2 subcontractor who hires its own tier-3 subbies. 4invoices handles both sides: you issue CIS invoices to your main contractor (CIS deducted from you) and receive CIS invoices from your subbies (CIS deducted by you, monthly return to HMRC). The platform manages both flows in one account.
Does CIS apply to all construction work?
Most physical construction does — building, site preparation, demolition, civil engineering, alteration, installations, repair, decoration. Architectural and design services are exempt. Manufacturing materials off-site is exempt. The HMRC guidance ESM4080 has the definitive list; 4invoices applies the right treatment based on the work type you select per line.
How do I claim gross-payment status?
Apply to HMRC via Form CIS304. You need turnover above £30,000/year (sole), £30,000/year per director (Ltd) or £100,000/year (partnership), plus 12 months of compliant tax history. If granted, no CIS deduction is made from your invoices, but you remain in the CIS scheme. 4invoices flags your status and adjusts the invoicing accordingly.
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