What is the Construction Industry Scheme?
The Construction Industry Scheme (CIS) is a HMRC tax arrangement for the construction industry. If you work as a subcontractor — a plumber, electrician, builder, decorator, or similar trade — the contractor paying you is required to deduct a percentage from your payment and pass it to HMRC on your behalf. This counts as advance payment towards your tax bill.
It sounds complicated, but the basics are straightforward once you understand them.
How CIS deductions work
If you're registered with HMRC under CIS at the standard rate, your contractor deducts 20% from the labour portion of your invoice. Materials are exempt — the deduction only applies to the work itself.
So if you invoice a contractor for £500 labour and £200 materials, the total is £700. The CIS deduction is 20% of £500 (labour only), which is £100. The contractor pays you £600 and sends £100 to HMRC.
If HMRC hasn't verified you yet, the deduction rate is 30% instead of 20%.
What should a CIS invoice show?
A proper CIS invoice needs to show:
- The labour amount
- The materials amount (if any)
- The subtotal
- The CIS deduction rate and amount
- The amount the contractor actually pays you
If you're also VAT registered, VAT is calculated on the total before CIS deduction and shown separately.
How Cleared handles CIS invoices
When you set up Cleared and indicate you're CIS registered, the system asks for your deduction rate (20% or 30%). When you send an invoice, it asks how much of the total is labour and how much is materials. It then calculates the CIS deduction automatically and shows the full breakdown on the invoice — labour, materials, subtotal, CIS deduction, and the amount your client actually pays.
You don't need to do the maths. You don't need to know the rules. You just tell Cleared what the job was and it handles the rest.
Can you be both VAT registered and CIS registered?
Yes — they're completely separate schemes. Many tradespeople are both. If you are, Cleared handles both on the same invoice: VAT is added to the gross amount, CIS is deducted from the labour portion, and the final invoice shows every figure clearly.
Frequently asked questions
What is the CIS deduction rate?
The standard CIS deduction rate is 20% for verified subcontractors. If HMRC has not verified you, the rate is 30%. The deduction applies to labour only — materials are excluded.
Do I have to register for CIS?
If you work as a subcontractor in the construction industry, you should register with HMRC for CIS. Without registration, contractors will deduct 30% from your payments instead of 20%. Registration is free and done through the HMRC website.
What counts as labour and what counts as materials under CIS?
Labour is the cost of the work itself — your time and skill. Materials are physical supplies used in the job — pipes, cables, tiles, and so on. Only labour is subject to CIS deduction. If you hire plant or equipment, this is also usually treated as labour.
Can I be VAT registered and CIS registered at the same time?
Yes. VAT registration and CIS registration are completely separate. Many tradespeople are both. On a CIS invoice, VAT is calculated on the gross total and CIS is deducted from the labour portion independently.
How do I create a CIS invoice?
Cleared creates CIS invoices automatically. You tell it what the job was, how much is labour and how much is materials, and it calculates the deduction and formats the invoice correctly. Setup takes under a minute through WhatsApp.