CIS for Materials — What Counts and What Doesn't

One of the most misunderstood areas of the Construction Industry Scheme is the treatment of materials. When a contractor pays a subcontractor, they must deduct CIS tax — 20% for registered subcontractors or 30% for unregistered ones — but that deduction is only applied to the labour element of the payment, not the cost of materials the subcontractor has supplied. Getting the materials figure right matters enormously. Overstate it, and the contractor risks penalties from HMRC. Understate it, and the subcontractor pays more tax than necessary upfront. In this guide, we will clear up exactly what counts as materials under CIS and what does not.

How Materials Work Under CIS

The basic principle is straightforward. When a subcontractor provides materials as part of a construction job, the cost of those materials is excluded from the CIS deduction calculation. The contractor only deducts CIS tax from the remaining amount — essentially the labour and profit portion of the invoice.

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Here is a quick example. A plasterer invoices a contractor for £3,000. Of that, £800 is for materials — plaster, bonding, beads, tape, and so on. The contractor deducts CIS at 20% on the labour portion: 20% of £2,200, which is £440. Without the materials exclusion, the deduction would have been £600. That £160 difference might not sound like much on a single invoice, but over a full tax year it adds up to a significant amount of cash flow.

The key point is that the subcontractor must actually supply the materials themselves. If the contractor buys and supplies the materials, they cannot be included on the subcontractor's invoice as a materials cost. The materials exclusion only applies when the subcontractor has purchased them and is passing the cost on to the contractor as part of the overall payment.

What Counts as Materials

HMRC defines materials fairly broadly. They include any building materials, components, or consumables that the subcontractor incorporates into the construction work or uses up in the process. Here are some common examples that clearly qualify:

• Building materials — bricks, blocks, cement, sand, aggregate, plaster, timber, plasterboard, insulation, roof tiles, slates
• Fixings and fittings — screws, nails, bolts, brackets, hinges, handles, locks
• Plumbing materials — pipes, fittings, taps, radiators, boilers (when supplied by the plumber)
• Electrical materials — cable, switches, sockets, consumer units, light fittings (when supplied by the electrician)
• Decorating materials — paint, wallpaper, paste, filler, masking tape, dust sheets (disposable ones used up on the job)
• Consumables used up on the job — sandpaper, cutting discs, drill bits, saw blades, silicone, adhesives, sealants

The common thread is that these items are either permanently incorporated into the building or structure, or they are consumed during the work and have no further use afterwards. A tube of silicone sealant used to seal around a bath is a material. A box of screws used to fix plasterboard is materials. A bag of cement mixed into a concrete slab is materials.

What Does Not Count as Materials

This is where things get tricky, and where mistakes are most common. Several categories of cost are not materials under CIS, even though subcontractors sometimes try to include them.

Plant and equipment hire does not count as materials. If a subcontractor hires a digger, scaffolding, a cherry picker, or a concrete pump, that is an equipment cost, not a material. It does not get excluded from the CIS deduction. The same applies to purchasing tools and equipment — a new drill or circular saw is a capital item, not a material consumed on the job.

Transport and haulage costs are not materials either. If you pay a skip company to remove waste, or hire a van specifically for a job, those costs stay within the CIS deduction calculation.

Fuel and travel — your diesel, petrol, or mileage getting to and from site is a business expense you can claim on your tax return, but it is not a material for CIS purposes.

Protective equipment and workwear — hard hats, steel-toe boots, hi-vis vests, gloves, and goggles are all business expenses, but they are not materials that get excluded from CIS deductions.

Labour provided by others — if you as a subcontractor bring your own labourers or sub-subcontractors, payments to them are not materials. They are labour costs, and the full amount including those costs is subject to CIS deductions (though you may have your own CIS obligations to those workers).

Accommodation and subsistence — if you stay in a hotel or B&B while working away, that is a legitimate expense but not a material under CIS.

The general rule is: if it does not physically become part of the building or get used up in the construction process itself, it is probably not a material.

How to Present Materials on Your Invoice

Good invoicing practice makes life easier for everyone. When you send an invoice to a contractor, you should clearly separate the materials cost from the labour cost. HMRC expects contractors to verify that the materials figure is reasonable, so a clear breakdown helps avoid disputes and delays.

A well-structured invoice might look like this:

• Labour: £2,500
• Materials (itemised or as a summary): £750
• Total before CIS: £3,250
• CIS deduction at 20% on £2,500: £500
• Net payment: £2,750

Some subcontractors provide a detailed list of materials with receipts. Others give a summary figure. Either approach works, but the more detail you provide, the less likely the contractor is to query the amount or reduce it. If a contractor is not confident the materials figure is accurate, they may deduct CIS on the full amount to protect themselves, which means you get paid less upfront.

Using bookkeeping software like Accounted to create your invoices helps ensure the CIS calculations are handled correctly every time. View our pricing to see which plan includes full CIS support. Penny, the AI assistant within Accounted, can even help you categorise purchases as materials versus other expenses, keeping your records clean for when you file your Self Assessment.

The Contractor's Responsibility

It is worth understanding the contractor's perspective too, because it affects how they treat your invoices. Under CIS, the contractor is responsible for making the correct deduction and paying it over to HMRC. If HMRC later decides the materials figure was inflated, the contractor faces penalties and may have to pay the shortfall.

Because of this, many contractors are cautious. Some will ask for receipts to support your materials claim. Others have their own estimating systems and will only allow a materials figure they consider reasonable for the type of work. If there is a genuine disagreement, it is better to resolve it with evidence — keep your purchase receipts and delivery notes.

HMRC does not expect contractors to audit every materials claim in forensic detail, but they do expect a reasonable level of due diligence. If a decorator claims £5,000 in materials on a £6,000 job, that would raise eyebrows. If an electrician doing a full rewire claims £3,000 in materials on a £7,000 job, that is entirely plausible.

For subcontractors, maintaining good records is essential. Our CIS subcontractors deductions guide goes into more detail on how deductions work and how to make sure you are not paying more than you should.

Mixed Invoices and Multiple Jobs

Sometimes a single invoice covers several small jobs, each with its own materials and labour component. You can either break the invoice down by job or provide overall totals, as long as the materials figure is accurate. Contractors generally prefer a clear breakdown, especially when submitting their monthly CIS returns to HMRC.

If you do a mix of CIS and non-CIS work for the same contractor — for example, some construction work and some excluded maintenance work — the invoicing becomes more complex. We cover that scenario in detail in our article on mixed contracts in CIS.

What Happens If Materials Are Disputed?

If a contractor refuses to accept your materials figure and deducts CIS on the full invoice amount, you are not permanently out of pocket. The excess deduction gets offset against your tax bill when you file your Self Assessment return. You will effectively get it back as a refund or a reduced tax bill. However, this means your cash flow suffers in the meantime, which is why getting the materials figure agreed upfront is so important.

If you believe a contractor is consistently refusing to acknowledge legitimate materials costs, you can raise the issue with HMRC, though in practice it is usually quicker to resolve it directly with the contractor by providing evidence of your purchases.

For a full overview of the CIS scheme and your obligations, take a look at our CIS subcontractors guide. And if you want to understand how gross payment status could eliminate CIS deductions entirely, our gross payment status guide explains the qualifying conditions.

Related Reading

• CIS Compliance Checks — What HMRC Looks For

• Domestic Reverse Charge VAT for Construction — Practical Guide

• Fence Builders and Installers — CIS and Tax Guide

• CIS Subcontractors Guide — Everything You Need to Know

• CIS Deductions Explained for Subcontractors

• Gross Payment Status Under CIS

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