CIS Materials: What's Excluded from Deductions

The Materials Rule

One of the most important rules in CIS is that deductions are calculated on the labour portion of a payment only. The cost of materials supplied by the subcontractor is excluded from the deduction calculation.

This means that if you supply materials as part of your construction work, the contractor should only deduct CIS from the labour element. Getting this right can save you thousands of pounds in unnecessary deductions.

What Counts as Materials?

Materials for CIS purposes include physical items that become part of the construction work or are consumed in the process. Examples include:

• Bricks, blocks, cement, and mortar
• Timber and plywood
• Plasterboard and plaster
• Pipes and fittings
• Electrical cables and components
• Tiles and adhesive
• Paint and decorating materials
• Roofing materials
• Insulation
• Nails, screws, and fixings

What Does Not Count as Materials?

The following are not considered materials and cannot be excluded from CIS deductions:

• Plant and equipment hire — scaffolding, diggers, generators (unless consumable)
• Tool costs — the subcontractor's own tools are business expenses, not materials
• Fuel — even if used on site
• Consumables used by the subcontractor — such as PPE, dust sheets, or cleaning materials (unless they become part of the finished work)
• Travel costs — getting to and from site
• Accommodation — even if staying near the site

The distinction is between items that are physically incorporated into the building or structure (materials) and items that help you do the work but are not incorporated (not materials).

How to Invoice Materials Correctly

To ensure materials are excluded from CIS deductions, your invoice must clearly separate labour and materials:

Good Invoice Format

| Description | Amount | |-------------|--------| | Labour: Plastering — 3 bedrooms and hallway | £2,500 | | Materials: Plasterboard (20 sheets), plaster (10 bags), bonding (5 bags), beading | £800 | | Total | £3,300 |

CIS deduction: 20% of £2,500 = £500 Payment: £3,300 - £500 = £2,800

Poor Invoice Format

| Description | Amount | |-------------|--------| | Plastering work including materials | £3,300 |

If you do not separate labour and materials, the contractor may apply CIS to the full £3,300: CIS deduction: 20% of £3,300 = £660 Payment: £3,300 - £660 = £2,640

That is £160 more deducted unnecessarily. Over a year with multiple jobs, this adds up.

Proving Materials Costs

Contractors are entitled to ask for evidence of materials costs. This might include:

• Receipts from builders' merchants
• Delivery notes
• Credit account statements
• A breakdown of materials used

If a contractor suspects that materials costs are inflated to reduce the CIS deduction, they can challenge the figures. In practice, most contractors accept reasonable materials claims without detailed evidence, but having receipts available protects both parties.

What If the Contractor Supplies Materials?

If the contractor provides the materials and you only supply labour, there are no materials to exclude. The full payment is subject to CIS deductions.

This is the situation for labour-only subcontractors. If you want materials excluded, you must purchase them yourself and include them on your invoice.

Mixed Supplies: Labour, Materials, and Plant

Some invoices include a mix of labour, materials, and plant hire. The treatment is:

• Labour — subject to CIS deductions
• Materials — excluded from CIS deductions
• Plant hire — subject to CIS deductions (not treated as materials)

If you hire a digger for a groundwork job and include the hire cost on your invoice alongside labour and materials, the digger hire is part of the deductible amount along with the labour. Only the physical materials are excluded.

Common Materials Mistakes

1. Not Separating Labour and Materials on Invoices

This is the most frequent error. If you do not itemise materials, the contractor has no basis for excluding them. Always separate the two elements.

2. Including Non-Material Items as Materials

Equipment hire, fuel, and consumables are not materials for CIS purposes. Including them in the materials figure could be challenged by HMRC.

3. Inflating Materials Costs

While it might be tempting to overstate materials to reduce deductions, this is fraud. HMRC can investigate and impose penalties. Keep your materials figures honest and supported by receipts.

4. Forgetting to Claim Materials You Supplied

Some subcontractors forget to separate materials on their invoices, resulting in deductions being applied to the full amount. Always review your invoices before submission.

How Accounted Handles Materials

When you record a CIS payment in Accounted, Penny asks whether materials were involved:

• Materials prompt — Penny asks about materials whenever a CIS payment is logged
• Automatic separation — labour and materials are split in your records
• Correct deduction calculation — only the labour portion is used for CIS deduction tracking
• Receipt storage — materials receipts captured via WhatsApp are linked to the relevant job

View our plans to see how Accounted supports your CIS workflow.

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Do not pay CIS on your materials. Sign up for Accounted and Penny will ensure every invoice is correctly split between labour and materials.