CIS Labour-Only vs Supply & Fix: How Your Contract Type Changes Your Deduction (2026/27)

Two electricians each send the same contractor a £3,600 invoice. Both are registered for CIS. The first works labour-only: the contractor bought the cable and fittings. The second works supply & fix and spent £1,200 of his own money on materials. The first has £720 deducted and receives £2,880. The second has £480 deducted and receives £3,120. Same rate, same invoice total, different base.

Neither of them has lost money: a CIS deduction is an advance payment towards your tax and National Insurance (GOV.UK). But the second electrician only gets his result if the invoice shows the materials and he can prove what he paid. Get that wrong and the extra deduction sits with HMRC until your tax return. This guide shows how each contract type is calculated, what can and cannot be excluded, and how to invoice so nothing extra is held back.

Labour-only vs supply & fix: the one question that decides your deduction

Forget the contract title for a moment. For CIS, one question matters: who paid for the materials?

• Labour-only: the contractor buys the materials. You invoice for your time and skill. There is nothing to exclude, so the deduction applies to the whole invoice (excluding VAT).
• Supply & fix: you buy the materials and install them. The deduction applies only to the part of the payment that is not the direct cost of those materials (HMRC CISR15060).
• Supply-only: you deliver or make materials but do not install them. HMRC lists making materials used in construction and delivering materials as jobs outside CIS (GOV.UK: What is CIS).

Contract type also feeds into a bigger question. HMRC decides employment status on the whole working arrangement, and whether you supply materials and carry the cost of mistakes is part of that picture. If most of your work is labour-only for one contractor, read how HMRC decides whether you are a subcontractor or an employee.

What your contractor must take off before applying the 20%

GOV.UK sets out the calculation in two moves. Start with the gross invoice. Take away what the subcontractor paid for the items below. Then apply the CIS rate to what is left (GOV.UK: Make deductions and pay subcontractors).

Scenario B below in one line: £3,600 invoice → £1,200 materials excluded → 20% of £2,400 = £480 deduction.

The six exclusions

• VAT. CIS is worked out on the invoice amount excluding VAT (CISR15100). Separately, if you are not VAT-registered, the VAT you paid when buying materials counts as part of your materials cost (explained below).
• Consumable stores: equipment used up on the job and now unusable.
• Fuel used on the job, except fuel for travelling.
• Plant hired for the job from a third party (CISR15090).
• Manufacturing or prefabricating materials.
• Materials, but only if you paid for them directly.

VAT on the materials themselves

If you are VAT-registered, only the VAT-exclusive cost of materials is excluded, because you reclaim that VAT separately. If you are not VAT-registered, the VAT you paid when buying materials can be included in the materials cost (CISR15100). For how VAT works between you and the contractor, see VAT and CIS: the domestic reverse charge.

What stays inside the deduction

• Your labour and your profit.
• Any markup on materials. Only the direct cost you can show you paid is excluded (CISR15060).
• A "hire charge" for plant you own. No notional deduction is allowed for your own plant, though the fuel it uses still counts (CISR15090).
• Travel, subsistence and accommodation the contractor pays or reimburses under the contract (CISR15080).

CIS is a deduction from your labour, not from your shopping list. The only way the contractor can see the difference is your invoice.

Worked examples: same work, different paperwork

All four examples use a subcontractor registered for CIS (20% rate). Figures exclude VAT unless stated.

Four traps that shrink supply & fix payments

1. No receipts, so the contractor guesses

Your contractor can ask for evidence that you paid for materials directly. Without it, they estimate (GOV.UK). A cautious estimate means a bigger deduction on your money.

2. Materials bought by someone else

The exclusion only belongs to the business that bought the materials for that contract. If the main contractor or another sub paid for them, you cannot list them on your invoice to reduce your own deduction (CISR15060).

3. Travel fuel listed as "materials"

Fuel for the plant on site is excluded. Fuel for driving to site is not. Put van fuel and mileage recharges on the labour side of the invoice, where they belong.

4. Working unverified or unregistered

Where each figure ends up: from invoice to tax return

Example tax month: 6 October to 5 November 2026, part of the 2026/27 tax year.

Check every statement against your invoice. For a line-by-line walkthrough, read CIS payment and deduction statement explained.

How to set up a supply & fix job so the deduction is right first time

1. Agree who buys the materials before you start Put it in the quote or a short written agreement. It decides which calculation applies.
2. Pay for materials from your own business The exclusion only covers costs you paid directly for that contract.
3. Keep receipts per job Label each receipt with the site or job reference so it matches the invoice line.
4. Itemise the invoice Separate lines for labour, materials at cost, third-party plant hire and plant fuel. Show VAT separately if you are registered.
5. Send receipts with the invoice Do not wait to be asked. Evidence up front removes the need for an estimate.
6. Check the statement within the month Gross payment, materials and deduction should match your invoice. If they do not, ask the contractor for a corrected statement straight away.
7. Report it correctly on Self Assessment Full invoiced amounts as income, deductions in the CIS box, materials as an expense. Any over-deduction is set against your tax bill or repaid.

Supply & fix invoice checklist

• Labour shown as its own line
• Materials listed at the price you paid, with no markup inside the "materials" figure
• Any markup shown on the labour side, not the materials line
• Third-party plant hire on its own line, with the hire company's invoice attached
• Fuel for plant on site listed separately from travel fuel
• Travel, mileage and accommodation recharges on the labour side
• VAT shown separately, or reverse charge wording if it applies
• Receipts attached and labelled with the job reference

Frequently asked questions

Does the CIS deduction apply to materials?

No. The deduction applies only to the part of the payment that does not represent the direct cost of materials to the subcontractor. On a supply and fix job, the contractor takes the materials cost off the invoice first and applies the 20% or 30% rate to what is left.

Which costs can a contractor exclude before calculating the CIS deduction?

HMRC lists six: VAT, consumable stores (equipment that is now unusable), fuel used except for travelling, plant hired for the job, the cost of manufacturing or prefabricating materials, and materials the subcontractor paid for directly. Everything else on the invoice, including labour, profit and travel costs, is subject to the deduction.

Can I add a markup to the materials on my invoice?

You can charge a markup, but only the direct cost you paid is excluded from the deduction. If you paid £1,000 for materials and invoice them at £1,150, the extra £150 is treated like labour and the contractor deducts 20% from it.

What happens if I cannot prove what I paid for materials?

Your contractor can ask for evidence, such as receipts, that you paid for the materials directly. If you have no evidence, the contractor estimates the cost, and that estimate can be lower than what you actually spent, which increases your deduction.

I own my digger. Can I exclude a hire charge for it?

No. Only plant hired from a third party counts as materials. If you use your own plant, no notional hire charge can be excluded, although fuel used by the plant can still be treated as materials.

Are travel, subsistence and accommodation costs excluded from CIS?

No. Where the contract obliges the contractor to pay or reimburse your travel, subsistence or accommodation, those amounts form part of the contract payment and the CIS deduction applies to them. Fuel for travelling is not excluded either.

Is supply-only work covered by CIS?

No. HMRC lists making materials used in construction and delivering materials as jobs outside CIS. Once you also install what you supply, the job is construction work and CIS applies to the labour element.

How do I report supply and fix income on my Self Assessment return?

Record the full amounts on your invoices as income and enter the CIS deductions taken by contractors in the CIS deductions box (Box 38 on the short self-employment pages, SA103S). Claim the materials you bought as a business expense, so you are taxed on profit, not on turnover.