Work out the deduction your contractor takes and what you are actually paid, the way HMRC does it, with every step shown.
Gives HMRC's own answers to its worked examples D1 to D4 in CIS 340.
Sources: gov.uk, making deductions and CIS 340, section 3.
Only materials the subcontractor bought for this job come off. If you are not VAT registered, the VAT you paid on them is part of their cost, so take off the full amount you paid (example D2). If you are VAT registered, you reclaim that VAT, so take off the price before VAT (example D3).
Travel, fuel for travelling, accommodation and subsistence paid to the subcontractor are part of the gross payment. The deduction is taken from them, just like labour. In HMRC's example D2, £60 of accommodation and fuel is in the £360 the 20% is worked out on.
VAT is never part of the deduction. Since 1 March 2021, most CIS work between VAT registered businesses uses the domestic reverse charge: you charge no VAT, and your contractor pays it to HMRC. It does not apply to work for an end user, such as a householder. Example D3 shows the older treatment, with VAT charged.
Your contractor pays it to HMRC and gives you a payment and deduction statement within 14 days of the end of each tax month. For a subcontractor, gov.uk says the deductions count as advance payments towards your tax and National Insurance bill.
CIS 340 gives no rounding rule. This calculator rounds the deduction to the nearest penny. Your contractor's figure is the one on your payment and deduction statement, so check it against this one.
CIS 340, Appendix D. The calculator gives the same answer for each one; try any of them.
| Example | Invoice | Deduction | Net paid |
|---|---|---|---|
| D1, labour only, 20%£200 labour | £200 | £40 | £160 |
| D2, supply and fix, not VAT registered, 20%£300 labour, £240 materials including VAT, £60 expenses | £600 | £72 | £528 |
| D3, supply and fix, VAT registered, 20%£400 labour, £200 materials before VAT, £120 VAT | £720 | £80 | £640 |
| D4, labour only, 30%£200 labour | £200 | £60 | £140 |
No. VAT is taken off before the rate is applied. If you are VAT registered, the VAT on your invoice is never part of the amount the deduction is worked out on.
No. What you paid for materials for the job is taken off first, along with consumable stores, fuel (except for travelling), plant hire and the cost of manufacturing or prefabricating materials. The deduction is only worked out on what is left.
Yes. Travel, fuel for travelling, accommodation and subsistence paid to you are part of the gross payment, so the deduction is taken from them like labour (HMRC's example D2).
Nothing. With gross payment status the rate is 0%, and your contractor pays you the full invoice amount.