Last reviewed: 14 August 2026
Quick summary
- CIS is normally calculated from the gross contract payment, but direct materials the subcontractor paid for can reduce the amount on which CIS is deducted.
- The contractor can ask for receipts. Mileage, travel fuel and accommodation are not the same as direct materials for this calculation.
- Keep a job-level trail: quote or order, supplier receipt, invoice, contractor payment and deduction statement.
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Why CIS was taken from only part of your invoice
For a payment under deduction, a contractor starts with the gross amount of the contract payment and may take off the direct cost of qualifying materials before applying the CIS rate. That is why a supply-and-fit invoice can produce a smaller deduction than a labour-only invoice. It is not a discount and it is not the same as your business profit.
HMRC says the materials must be paid for directly by the subcontractor and used for the construction contract in question. The contractor is entitled to ask for evidence. In practice, a clean invoice description and matching supplier receipt make the conversation much easier than reconstructing costs after payment.
The result can look odd in the bank: your invoice might say GBP 1,800, a contractor statement might show GBP 500 materials and CIS on GBP 1,300, and the bank will show the net payment. None of those three figures replaces the other. Your accounts need the full invoice as income, your materials purchase as an expense where appropriate, and the CIS deduction as tax already withheld.
The five-document workflow that stops disputes
Start before you send the invoice. Give each job a short reference, even if it is only the site name and week ending date. Put that reference on the customer order, supplier receipt and invoice. If the contractor asks how you reached the materials figure, you can show one connected trail rather than a drawer full of unrelated receipts.
- Job scope: save the order, work schedule or message that explains what you were supplying and fitting.
- Supplier evidence: retain the dated receipt or supplier invoice for items you paid for directly. Note the job reference if the receipt serves more than one job.
- Your customer invoice: show the full price and make the labour and materials description understandable. Do not invent a materials split simply to change the CIS outcome.
- Contractor statement: check gross payment, materials figure and CIS deducted against your own paperwork when it arrives.
- Bank reconciliation: match the net cash receipt to the statement and note any retention, correction or part-payment separately.
This routine has a second benefit for MTD and Self Assessment. A bank feed alone often sees only the net payment. It cannot tell your accountant whether the missing amount was CIS tax, a genuine materials figure, a retention, a payment error or a later credit note.
Three situations where the distinction matters
1. The electrician who supplies fittings
An electrician buys sockets, cable and fittings specifically for a refurbishment, then invoices the contractor for labour and the supplied items. Direct supplier evidence can support the materials amount used in the CIS calculation. The account still needs the gross invoice, the supplier cost and the deduction statement; calling the bank receipt "sales" will not show the tax already withheld.
2. The carpenter who drives to site
Fuel used for travelling to site, accommodation and subsistence may feel like job costs, but HMRC's CIS guide says travelling expenses, including travel fuel, are included in the gross amount for the deduction calculation. They should not be silently put in the materials box. A separate mileage or vehicle-cost record is the better evidence for the wider business accounts.
3. The subcontractor hiring a concrete mixer
Plant hired from a third party for the construction work, and consumables such as fuel needed for its operation, can have specific CIS treatment. Owning the same equipment does not create a notional plant-hire amount. Save the hire invoice, dates and job reference and ask the contractor or accountant before assuming the line belongs in materials.
4. The builder with a mixed invoice
A builder buys materials for one customer but includes a broad "materials" line in another contractor's invoice. That is not a good fit for the direct-cost rule. The evidence should relate to the contract being paid. This is exactly the sort of mismatch that creates an argument over deductions or makes a later return difficult to defend.
What to keep in a CIS materials folder
- Customer work order, text or agreed scope for each job.
- Supplier receipts and invoices showing what you paid directly and when.
- Credit notes, returns and supplier rebates that change the cost.
- Your gross invoice, including VAT treatment where relevant.
- Each contractor payment and deduction statement. A statement should be supplied within 14 days of the end of the relevant tax month where CIS was deducted.
- Bank entries matched to statements, with retentions and part-payments separately labelled.
- A distinct mileage, vehicle, travel and subsistence record, rather than adding these to materials.
- A monthly list of missing statements and chased corrections.
If you buy one batch of stock for several jobs, add an allocation note at the time. It does not need to be fancy: date, supplier invoice number, job references, quantity or a sensible split. What matters is that the trail is understandable months later.
Common mistakes that cost time
Using the invoice label instead of the actual cost. The direct cost paid by the subcontractor matters. A materials charge passed to the customer is not, on its own, proof of qualifying materials. Keep the supplier evidence.
Entering only net CIS deposits as income. A sole trader normally records the full invoice amounts as income and puts CIS deductions in the appropriate tax-return field. Net cash is not your turnover figure.
Calling every job cost materials. Tools you keep, travel, accommodation and personal purchases need their own treatment. A clear category is more valuable than an aggressive materials split.
Waiting for January. Contractor statements are monthly documents. Reconcile them monthly, especially where several contractors, retentions or variations are involved.
What to send in your first accountant message
Write: "I work under CIS and supply materials on some jobs. I want to check that contractors are deducting CIS from the right amount and that I am recording gross invoices, direct materials and CIS tax separately. I can send a sample invoice, supplier receipt, contractor statement and bank payment." That tells the accountant the exact problem without asking them to guess from a net bank figure.
Questions to ask an accountant
- What should my invoice show when I supply and fit materials?
- Which of my regular job costs belong in a separate mileage or expense record rather than a CIS materials figure?
- How do you want me to record retention money and later corrections?
- Can my software or spreadsheet reconcile gross invoice, CIS statement and net cash?
- What should I do when a contractor's materials amount or deduction statement does not agree with my records?
Related guides
Key takeaway
A CIS materials deduction is a payment-calculation issue, not a shortcut for recording profit. Keep the direct-cost evidence, gross invoice, payment statement and net bank receipt together for each job.
Official guidance checked on 14 August 2026
FAQs
Can a contractor ask me for material receipts?
Yes. HMRC says a contractor can ask for evidence that you paid for direct materials. Keep receipts that connect the purchase to the contract.
Does an owned van count as plant hire for CIS?
HMRC's CIS guide distinguishes third-party plant hire from plant you own. Do not assume a notional hire amount can be used; keep the facts and get advice for your situation.
What if my CIS statement is missing?
Ask the contractor for a duplicate and keep a note of the request. A monthly check makes a missing statement easier to resolve than a year-end chase.