CIS Materials vs Labour on Invoices: How Deductions Apply
How to separate materials and labour on CIS invoices. Learn what qualifies as materials, how to reduce your CIS deductions, and what evidence contractors need.
Key Actions
- Separate materials and labour on every invoice you send to contractors
- Keep receipts for all materials purchased for each job
- Check your CIS payment statements to confirm materials were deducted before CIS was calculated
- Ask your contractor what evidence they need for material claims
- Track material costs per job so you can support your figures if questioned
Understanding the difference between CIS materials vs labour on your invoices is essential for cash flow. The CIS deduction (20% or 30%) only applies to the labour portion of your payment — not to materials you've purchased for the job. Getting this split right directly affects how much cash you take home each month.
This guide explains what counts as materials, how to show them on your invoices, and what evidence your contractor needs to exclude them from CIS deductions.
How CIS Deductions Apply to Materials and Labour
CIS deductions are calculated on the part of your payment that represents labour. Materials you've directly purchased for a construction contract are deducted from the gross amount before CIS is applied.
Example:
| Item | Amount |
|---|---|
| Total invoice | £2,000 |
| Materials supplied | £600 |
| Amount subject to CIS | £1,400 |
| CIS deduction (20%) | £280 |
| Net payment received | £1,720 |
Without separating materials, the contractor would apply CIS to the full £2,000, deducting £400 instead of £280. That's £120 less in your pocket each time — money you'd eventually get back through Self Assessment, but not until you file your return.
What Counts as CIS Materials
CIS materials are items a subcontractor purchases specifically for a construction contract that become part of the finished work or are consumed during it. These materials are excluded from the gross payment before CIS deductions are calculated.
Qualifying materials include:
- Building supplies — bricks, blocks, timber, cement, plaster, plasterboard
- Fixtures and fittings — door handles, hinges, screws, nails, brackets
- Paint and finishes — paint, varnish, stains, sealants
- Plumbing and electrical supplies — pipes, fittings, cables, sockets, switches
- Flooring materials — tiles, adhesive, grout, underlay
- Insulation materials — mineral wool, foam boards, membranes
- Consumable stores — items used up during construction (sandpaper, drill bits, blades)
- Plant hire — scaffolding, cement mixers, cranes hired from a third party for the job
- Fuel — fuel used by hired plant on site (not fuel for travelling to and from site)
As a general rule, anything you'd purchase from a builders' merchant for a specific job is likely to qualify.
What Doesn't Count as CIS Materials
Items that do not qualify as CIS materials are treated as part of the labour payment and subject to the full CIS deduction. The following costs cannot be separated from labour on your invoice:
- Your own tools and equipment — drills, saws, levels, and other tools you own and reuse across jobs
- Travel costs — fuel for getting to and from site, van running costs
- Accommodation — hotels or lodgings near a job site
- Protective clothing and PPE — hard hats, boots, hi-vis vests (these are allowable expenses on your tax return instead)
- Equipment you own — you cannot claim a notional hire charge for your own plant or machinery
- Food and drink — site meals, tea, coffee
These items may still be claimable as business expenses on your Self Assessment return, but they cannot be separated from labour on your CIS invoice to reduce the deduction.
How to Show Materials and Labour on a CIS Invoice
There's no mandatory HMRC invoice format for CIS, but your contractor needs to see a clear breakdown to exclude materials from the deduction. A well-structured CIS invoice includes:
- Your name and UTR (so the contractor can verify you)
- The contractor's name and address
- Invoice date and number
- Description of work completed
- Labour charge — listed separately
- Materials supplied — itemised with costs
- Total amount
Example invoice layout:
Invoice #247 — 15 April 2026
Labour: Kitchen installation (3 days) £900.00
Materials:
Kitchen units (supplied by subcontractor) £1,200.00
Worktop £350.00
Fixings, adhesive, sealant £85.00
Total materials £1,635.00
TOTAL £2,535.00
In this example, CIS is calculated on £900 (labour only), not £2,535. At the 20% rate, the deduction is £180 — compared to £507 if materials weren't separated.
Evidence Contractors Need for CIS Material Claims
Your contractor has a responsibility to verify that material costs are genuine and not overstated. HMRC expects contractors to check material claims and keep records.
What contractors typically ask for:
- Receipts from builders' merchants or suppliers showing what you bought, when, and how much it cost
- Supplier invoices for larger material orders
- Delivery notes confirming materials were delivered to the job site
If you can't provide evidence:
The contractor can estimate the cost of materials based on the type of work. However, their estimate may be lower than your actual spend — meaning more of your payment gets caught by CIS deductions.
Key rule: Only materials you've directly purchased for the specific contract qualify. If you're using stock you bought in advance and didn't purchase specifically for this job, the cost may not be deductible from your CIS payment. In practice, keeping dated receipts that match the job timeline is the simplest way to support your claims.
Common Mistakes With Materials on CIS Invoices
Not separating materials at all
Some subcontractors invoice a single lump sum for "labour and materials." The contractor then has no choice but to apply CIS to the full amount. This is the most common and most costly mistake.
Including mark-up on materials
CIS material deductions cover the actual cost of materials — not a profit margin. If you bought materials for £500 and invoiced £650, the contractor can only exclude £500 from CIS. The £150 mark-up is treated as labour income.
Claiming your own tools as materials
Tools you own and bring to every job (drills, saws, measuring equipment) are not materials for CIS purposes. They're capital items that you can claim as business expenses or through capital allowances on your tax return.
Claiming travel fuel as materials
Fuel for travelling to and from site doesn't qualify as CIS materials. Fuel for hired plant used on site does qualify, but you need to keep it separate.
What to Check on Your CIS Payment Statement
After your contractor pays you, check your CIS payment statement to confirm that materials were handled correctly. The statement shows:
- Gross amount — your total invoice
- Cost of materials — the amount excluded from CIS
- Amount liable to deduction — gross minus materials
- CIS deduction — the percentage applied to the liable amount
If the materials figure on your statement doesn't match what you invoiced, contact your contractor. Errors here mean you're having more deducted than necessary — and while you can reclaim the difference through Self Assessment, it ties up your cash until then.
Frequently Asked Questions
Do I pay less tax overall if I separate materials on my invoice?
No — the total tax you owe for the year doesn't change. Separating materials reduces the CIS deduction taken from each payment, which improves your cash flow during the year. Your final tax liability is calculated on your Self Assessment return based on your profit, regardless of how CIS was deducted.
Can my contractor refuse to exclude materials from the CIS deduction?
In practice, yes. HMRC places the responsibility on the contractor to verify material costs and ensure they're not overstated. If you can't provide receipts or evidence, the contractor may apply CIS to the full amount to protect themselves. Providing clear invoices and receipts makes it easier for them to exclude materials.
What if the contractor supplies the materials instead of me?
If the contractor purchases the materials and provides them to you, those costs don't appear on your invoice at all — you're only invoicing for labour. CIS applies to your full invoice amount because there are no subcontractor-purchased materials to exclude.
Does VAT affect the CIS materials calculation?
VAT is excluded from CIS calculations entirely. If you're VAT-registered, CIS is calculated on the VAT-exclusive amount. The contractor collects your CIS deduction from the net figure, and VAT is handled separately.
This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax rules change frequently. Always verify current requirements on GOV.UK or consult a qualified accountant for your specific situation.