To all CLC net/unmatched deduction status subcontractors
Via email Date: 27 August 2025
Dear supply chain member,
Tax compliance and CIS
At CLC, we take our responsibility for tax compliance very seriously. Our tax strategy is to ensure that we pay the right amount of tax at the right time, to report correctly to the authorities and to comply with all tax legislation. A s part of our ongoing review of tax compliance within CLC, we want to ensure that we are following HMRC guidelines in all relevant aspects, and we believe that all our supply chain partners should have the same goals for tax compliance.
With this in mind, we would like to remind you of the HMRC guidelines on material costs and its deductibility under the Construction Industry Scheme (“CIS”) legislation.
In line with HMRC guidance, any subcontractor invoice submitted to CLC containing direct material costs must include a detailed breakdown of these costs.
Invoices should display purchases as distinct categories rather than general descriptions. Submissions that list a broad term such as “Material” with a total amount will not be accepted. A breakdown of the individual items that comprise the total will need be provided. For example:
• Vinyl - £600
• Carpet - £300
• Paint - £200
To qualify as a direct cost of materials under CIS, the amount must reflect the actual price paid to third parties by the subcontractor for the physical materials used on the project.
Direct cost of materials will exclude any costs related to transport, fuel, labour, or other services. Markups, profit margins, or additional charges added to the material cost do not qualify as direct costs under CIS with the exceptions stated on the HMRC link below.
Other items that do not qualify as direct materials include:
• Travel-related costs including fuel used for travelling to and from the site
• Accommodation expenses
• Plant/tools owned by the subcontractor
In line with HMRC guidelines, we will request receipts on a sample basis to audit compliance of subcontractors that have net or unmatched status:
• All invoices will be subject to random sample checks;
• Invoices where material costs exceed 40% of the total invoice value will be subject to more frequent checks;
• Invoices where material costs exceed 5 0% of the total invoice value will require receipts to be provided in all cases. If you are raising invoices where materials exceed 50% of the total invoice value please provide back up documentation when submitting your invoices to reduce any time needed for compliance checks.
For more information, please visit the below HMRC websites: CISR15060 - The Scheme: payments: materials - HMRC internal manual - GOV.UK Construction Industry Scheme: a guide for contractors and subcontractors (CIS 340) - GOV.UK
We look forward to your full support in providing receipts when requested. Unfortunately, if we do not receive receipts in a timely manner, we will have to estimate the material cost and to require full receipts for material costs for all future invoices.
Many thanks in advance for working with us to ensure full tax compliance.
Yours faithfully