Yes, but it is an add-on rather than a standard inclusion, and it needs enabling on a suitable plan. Once on, Xero calculates deductions on labour, keeps materials out of the calculation, produces the monthly return and generates subcontractor payment and deduction statements. It handles CIS suffered for subcontractors too. This is a real difference in how the two main packages price construction functionality, and it is worth pricing the whole stack rather than comparing headline subscriptions — the cheaper base plan plus the add-on is not automatically cheaper overall. As with any CIS setup, the thing that determines whether it works is recording each subcontractor at their verified rate at the outset. The software applies what you tell it and has no idea what HMRC said.