CIS for Labour-Only Subcontractors

What Is a Labour-Only Subcontractor?

A labour-only subcontractor provides their skills and physical work on a construction project but does not supply any materials. The contractor provides all the materials, equipment, and supplies. The subcontractor invoices purely for their time and labour.

This is common in many construction trades — plasterers, bricklayers, electricians, and plumbers often work on a labour-only basis, especially on larger projects where the main contractor manages material procurement.

How CIS Deductions Apply to Labour-Only Work

When you work labour-only, the entire invoice amount is subject to CIS deductions. There are no materials to exclude from the calculation.

For a registered subcontractor at the 20% rate:

• Invoice for labour: £3,000
• CIS deduction: £600 (20% of £3,000)
• Payment received: £2,400

Compare this to a subcontractor who supplies materials:

• Invoice total: £3,000 (£2,000 labour + £1,000 materials)
• CIS deduction: £400 (20% of £2,000 labour only)
• Payment received: £2,600

The labour-only subcontractor has £200 more deducted from the same gross invoice. Over a year, this difference can amount to thousands of pounds in additional cash held by HMRC.

The Cash Flow Impact

Labour-only subcontractors feel the CIS cash flow squeeze more than those who supply materials. With no materials element excluded from deductions, a larger proportion of every payment is held back.

For a labour-only subcontractor earning £50,000 per year:

• At 20%: £10,000 deducted over the year
• At 30% (if unregistered): £15,000 deducted

That is a substantial amount of working capital tied up with HMRC until you file your Self Assessment and receive a refund.

Maximising Your Refund

Because the full invoice amount is subject to deductions, labour-only subcontractors often receive larger refunds through Self Assessment. The key is to claim all your allowable expenses:

Common Expenses for Labour-Only Subcontractors

• Hand tools — hammers, trowels, chisels, spirit levels, tape measures
• Power tools — drills, saws, angle grinders (if you provide your own)
• PPE — safety boots, hard hats, high-visibility clothing, gloves, goggles
• Vehicle costs — fuel, insurance, MOT, road tax, repairs, or mileage at HMRC rates
• Travel — public transport fares, parking at sites, accommodation for working away
• Phone — the business proportion of your mobile bill
• Insurance — public liability insurance, personal accident insurance
• Training — CSCS card courses, trade qualifications, health and safety courses
• Accountancy fees — the cost of preparing your tax return
• Subscriptions — trade body memberships, professional subscriptions

Every expense reduces your taxable profit, widening the gap between your CIS deductions and your actual tax liability — resulting in a larger refund.

Employment Status Considerations

Labour-only subcontractors are more likely to have their employment status questioned by HMRC. When you do not supply materials, tools, or equipment, the line between self-employment and employment can become blurred.

Key factors HMRC considers:

• Control — do you decide how and when the work is done, or does the contractor dictate this?
• Substitution — can you send someone else to do the work in your place?
• Financial risk — do you bear any financial risk (such as having to correct faulty work at your own expense)?
• Equipment — do you provide any of your own tools or equipment?
• Exclusivity — are you free to work for other contractors simultaneously?

If HMRC determines that you are actually an employee, the contractor could face backdated PAYE and National Insurance charges. As a subcontractor, you could also be affected — your Self Assessment position would change, and any CIS deductions would need to be reclassified.

To protect your self-employed status, ensure you have a written contract that reflects your working arrangements, maintain the right to substitute, and work for multiple clients where possible.

Gross Payment Status for Labour-Only Subcontractors

Labour-only subcontractors can apply for Gross Payment Status just like any other subcontractor. The criteria are the same — business test, turnover test (£30,000 minimum), and compliance test.

GPS is particularly valuable for labour-only workers because of the higher proportional impact of deductions. Receiving full payment and managing your own tax can make a real difference to your ability to cover personal and business costs throughout the year.

Record Keeping Tips

Without materials to track, your record keeping is simpler in some ways but just as important:

• Keep all CIS payment and deduction statements
• Record all income received and invoices issued
• Keep receipts for all business expenses
• Maintain mileage logs if claiming vehicle expenses
• Keep records for at least six years

How Accounted Helps Labour-Only Subcontractors

Accounted is ideal for labour-only subcontractors who want to maximise their CIS refund:

• Automatic CIS tracking — Penny records deductions from your bank transactions
• Expense capture via WhatsApp — photograph receipts and Penny categorises them instantly
• Mileage logging — track trips to site and Penny calculates your HMRC mileage claim
• Real-time tax estimate — see your projected refund throughout the year
• Self Assessment preparation — all your data ready when it is time to file

Explore our pricing to find the right plan.

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Every expense counts when you are labour-only. Sign up for Accounted and let Penny make sure you claim every penny you are entitled to.