CIS invoice template for construction subcontractors

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor's payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor's tax and National Insurance (what is the Construction Industry Scheme).

CIS covers most construction work to permanent or temporary buildings and structures, and civil engineering work such as roads and bridges. Some work is not covered, for example architecture and surveying, carpet fitting and delivering materials. Subcontractors do not have to register for CIS, but contractors take a higher deduction from those who do not.

The contractor deducts the percentage HMRC gives them (make deductions and pay subcontractors):

• 20% for registered subcontractors. The 20% rate applies only if you are registered for CIS and the contractor can verify you.
• 30% for subcontractors who are not registered, or who cannot be verified.
• 0% for subcontractors with gross payment status, so no deduction is taken in advance.

The contractor starts with the total (gross) amount of your invoice and takes off the amounts you paid for that are not subject to the deduction:

• VAT
• materials you paid for directly
• equipment that is now unusable
• fuel, other than for travel
• hired equipment, such as plant hire
• manufacturing or prefabricating materials

The CIS percentage is then taken from what is left. If you cannot show what you paid for materials, the contractor will estimate the cost, so keep your receipts (what you must do as a CIS subcontractor).

This example is for a registered subcontractor who is not VAT registered, so no VAT or reverse charge applies. Materials are shown on their own line, so the deduction is worked out on the labour only.

Each month, the contractor must give you a statement showing the payments made to you and the deductions taken, within 14 days of the end of each tax month. A tax month runs from the 6th of one month to the 5th of the next, so for 6 May to 5 June the statement is due by 19 June (make deductions and pay subcontractors). If you do not get one, or the figures look wrong, ask the contractor.

The VAT domestic reverse charge applies to standard and reduced rate building and construction services between businesses registered for VAT in the UK, where the payments are reported within CIS (check when you must use the reverse charge). It does not apply when the customer is an end user or an intermediary supplier, as HMRC defines them.

With the reverse charge, the customer pays the VAT to HMRC instead of paying it to you. HMRC's reverse charge technical guide says the invoice must:

• show all the information required on a VAT invoice
• make clear that the domestic reverse charge applies, and that the customer must account for the VAT
• state how much VAT is due under the reverse charge, or the VAT rate if you cannot show the amount
• not include that VAT in the amount you charge the customer

The VAT regulations require the reference "reverse charge" on the invoice. HMRC gives example wording such as "Customer to pay the VAT to HMRC", "VAT Act 1994 Section 55A applies" and "S55A VATA 94 applies".

InfinitInvoice has a document type for each of these construction cases:

• CIS subcontractor invoice: Construction Industry Scheme. Labour and materials are split and the deduction applies to labour only.
• Construction reverse charge: Construction work where the customer accounts for the VAT. Can include a CIS deduction.
• Materials and labour: Trades work with materials and labour shown separately, without CIS.
• Retention invoice: Construction contract that holds back a percentage until completion.

On a CIS invoice you pick the rate (0%, gross payment status; 20%, verified subcontractor; 30%, not verified), and lines you mark as materials are kept out of the deduction. The CIS summary in the web app adds up the deductions on your invoices by tax month and by contractor for each tax year, so you can check them against your statements, and it downloads as a PDF.

The Trade designs in the template gallery are built for materials and labour, with a clear deduction panel. Not in construction? Start with the everyday invoice template.