CIS invoices and the construction reverse charge

If you work in construction as a subcontractor, two rules change how your invoices look: the Construction Industry Scheme (CIS) and, for VAT-registered work, the domestic reverse charge.

What is CIS?

Under CIS, a contractor deducts money from your payment for labour and pays it to HMRC as an advance towards your tax and National Insurance. You still invoice the full amount; the deduction is shown as a line that reduces what the contractor actually pays you.

CIS status and deduction rates

The rate the contractor deducts depends on your verification status with HMRC:

• Registered (20%) — you’re registered for CIS and verified.
• Not registered (30%) — you’re not registered, or couldn’t be verified.
• Gross payment status (0%) — no deduction; you settle your tax yourself.

The contractor verifies your status with HMRC, which tells them which rate to use.

Labour vs materials

The CIS deduction applies to the labour part of your invoice only. The cost of materials is excluded, and so is VAT. That’s why every line should be tagged as labour or materials — mis-tagging changes how much is withheld.

For example, on a £1,000 labour + £500 materials invoice with 20% CIS, the deduction is £200 (20% of the £1,000 labour), not £300.

The VAT domestic reverse charge

For most VAT-registered, business-to-business construction work, the domestic reverse charge applies. Instead of you charging VAT and the customer paying it to you, the customer accounts for the VAT directly to HMRC.

On the invoice this means:

• you show the VAT rate and the VAT amount, but
• you don’t add the VAT to the total the customer pays you, and
• you include wording making clear the customer must account for the VAT.

The generator inserts compliant wording automatically, for example: “Domestic reverse charge: customer to account to HMRC for the VAT.” It typically combines with CIS — the deduction applies to labour, and the VAT is reverse-charged.

Always confirm the reverse charge applies to your specific work on GOV.UK.