You finish the work. You send the invoice. The payment arrives — and it is far smaller than expected.
Many subcontractors discover this when they receive their first CIS deduction at 30%. Naturally, the first reaction is usually: “Why have they taken so much?”
The Standard CIS Deduction
Under the Construction Industry Scheme (CIS), registered subcontractors are normally subject to 20% deductions. This is the rate most people expect to see on their payment and statement.
Why 30% Happens
The higher 30% rate usually applies when HMRC cannot verify a subcontractor correctly. Common reasons include:
- not being registered for CIS
- incorrect details given to the contractor
- mismatched records between you and HMRC
- missing tax information
From the contractor’s perspective, when verification fails they may have no choice but to apply the higher rate. It is rarely a deliberate decision against you.
Can It Be Fixed?
Usually, yes. Once registration and verification issues are resolved, future payments may return to the standard 20% rate. Any tax over-deducted is not lost either — it is accounted for through your Self Assessment or company return, and can often be refunded.
Why It Matters
The difference between 20% and 30% can have a significant impact on cashflow, especially for subcontractors operating on tight margins. On a £2,000 labour invoice, that is the difference between £400 and £600 deducted before the money reaches you.
The Bottom Line
A 30% CIS deduction is usually a sign of a registration or verification issue rather than a mistake by the contractor. Resolving the underlying issue quickly can help prevent future over-deductions — and 123Tax can help you keep your CIS records straight so the money you are owed comes back to you.