CIS invoice
requirements

Under the Construction Industry Scheme, the contractor who pays you deducts money from your payments and passes it to HMRC as an advance towards your tax and National Insurance. Your invoice does not make the deduction, but how you write it decides whether the deduction is right. A clear CIS invoice gets you paid the right amount first time.

Split labour from materials

Contractors do not take CIS deductions from amounts on your invoice for:

• VAT
• equipment which is now unusable, known as consumable stores
• plant hired for the job
• manufacturing or prefabricating materials
• materials you have paid for directly

Everything else, essentially your labour, is subject to deduction. So show labour and materials as separate lines. If you lump them together, the contractor may deduct from the whole amount or estimate the materials themselves. Keep receipts for the materials; your contractor may ask for evidence, and without it they will estimate the cost.

The deduction rate

When a contractor pays you under CIS, they deduct 20% if you are registered for CIS and they can verify you. If either does not apply, they deduct 30%. If you have gross payment status, they take no deduction and you pay your tax in full through Self Assessment. The CIS calculator shows the deduction on any invoice.

Your details

Give the contractor the exact details you used when you registered for CIS, including your Unique Taxpayer Reference and your legal business or trading name. The contractor uses them to verify you. If they cannot verify you, you can be paid at the higher rate, so make sure the name on your invoice matches your CIS registration.

VAT on a CIS invoice

If you are not VAT registered, show no VAT. If you are, the VAT domestic reverse charge usually applies to CIS construction services for a VAT and CIS registered customer who is not an end user. Your invoice then shows the VAT that the customer must account for, but does not add it to the amount you are paid. The reverse charge checker confirms whether it applies, and the guide on reverse charge invoice wording shows what to write.

A worked example

A registered subcontractor invoices £1,500 of labour and £500 of materials, and is not VAT registered. The invoice total is £2,000. The contractor deducts 20% of the £1,500 labour, £300, and pays £1,700. The £300 appears on the payment and deduction statement and counts towards the subcontractor's tax bill.

Payment and deduction statements

Each month, your contractor must give you a payment and deduction statement showing what they paid you and the deductions they took, within 14 days of the end of each tax month. Check each one against your invoices. If a statement is missing, ask for it; if the figures look wrong, raise it with the contractor. Keep every statement: you need them to claim the deductions against your tax bill, and a year of deductions often adds up to more than you owe, leaving a refund.

Retentions and stage payments

If the contract holds back a retention, invoice it when it becomes due and show it as the retention against the original work. The deduction is made from each payment when it is made. The guide on retention payments in construction covers the VAT and tax side.

Recording CIS income

Record the full invoice value as income, not the net amount you received, and record the deduction as tax already paid. Mixing them up is one of the most common CIS mistakes on a tax return, and it can cost you the refund you are owed.

The deduction at each rate

What you are paid on a £2,000 invoice (£1,500 labour, £500 materials)

• Gross payment status, 0%£2,000
• Registered, 20%£1,700
• Not registered, 30%£1,550

Registering for CIS saves ten percentage points on every labour payment straight away, and the deductions count towards your tax bill either way.

A CIS invoice, line by line

The CIS calculator shows the deduction and what you will be paid for any invoice, with or without VAT.

Getting the materials figure right

Only materials you paid for directly are excluded from the deduction. If the contractor supplied them, they are not on your invoice at all. If you bought them, keep the receipts; your contractor may ask for evidence, and without it they will estimate the cost of the materials. Do not put a margin on materials into the materials line to reduce the deduction; the materials line should reflect what they cost you, and any profit belongs with the labour.

Monthly statements and your tax return

Each payment and deduction statement shows what the contractor paid you and what they deducted in that tax month. Tax months run from the 6th of one month to the 5th of the next, so a statement for 6 April to 5 May should arrive by 19 May. Add your statements up at the end of the tax year: the total deducted is tax you have already paid. On your Self Assessment return, you report your full turnover and expenses, then claim the deductions. Many subcontractors, especially those with high material or travel costs, find that the deductions exceed the tax they owe and receive a refund. The CIS calculator's refund view estimates it.

CIS and VAT together

The two systems run side by side. CIS is about income tax and National Insurance, deducted from labour. VAT is about the sale, and for VAT-registered subcontractors working for VAT and CIS registered contractors, the domestic reverse charge usually means the contractor accounts for the VAT. On one invoice you may therefore show a VAT amount that is not charged, and a total from which CIS will be deducted. The reverse charge checker confirms the VAT treatment, and reverse charge invoice wording shows an example with both.

Gross payment status

With gross payment status, contractors pay you in full and you pay your tax yourself through Self Assessment. HMRC grants it to subcontractors who pass business, turnover and compliance tests, such as paying tax on time. It improves cash flow considerably, but it means setting money aside for your tax bill, as nothing is deducted along the way. Your invoices look the same; the deduction line simply shows nothing.

Getting paid on time under CIS

Contractors usually pay subcontractors on a fixed monthly cycle tied to the tax month, often after a valuation or application for payment. Find out their cycle and submit your invoice in time for it. Late payment rights still apply: if your contractor is a business and pays after the agreed date, you can claim statutory interest and compensation, worked out with the late payment interest calculator, on the amount due to you. The guide on how to chase an unpaid invoice covers the steps, and invoice payment terms explains the limits on agreed terms.

Definitions

For the scheme itself, see CIS. For how the deduction works, see CIS deduction. For the VAT side, do I charge VAT on my invoice starts with the registration question every subcontractor should answer first.

Common questions

Do I need to show my UTR on the invoice? It is not required on the invoice. Give the contractor your registration details so they can verify you.

My contractor deducted 30% but I am registered. They may not have been able to verify you, often because the name they used does not match your registration. Check the details you gave them and ask them to verify you again.

Do CIS rules apply to work for a householder? No. CIS applies to payments from contractors, not from private householders having work done on their own homes.

Should I invoice the retention separately? Invoice it when it is due under the contract, referring back to the original work; see retention payments in construction.

What records should I keep for CIS? Every invoice, every payment and deduction statement, your materials receipts and your bank records. Together they prove your income, your costs and the tax already deducted, which is exactly what you need to claim any refund. Keep them for at least 5 years after the 31 January filing deadline; see how long to keep invoices.