For subcontractors
CIS invoice template: what a subcontractor invoice has to show
A CIS invoice is an ordinary invoice with one job to do properly. It has to split labour from materials, because the contractor deducts tax from the labour and from nothing else.
What goes on it
- Your details. Your business name, your address and your Unique Taxpayer Reference. The contractor needs that reference to verify you.
- Their details. The contractor business name, and the site address or job reference, not just their head office.
- An invoice number and a date. Numbers that run in order, with none missing.
- What you did. A plain description of the work and the dates you were on site.
- Labour on its own line. Your days or hours, your rate, the total.
- Materials on their own line. What you paid for them, listed apart from the labour.
- Plant hire and consumables apart again if you paid for them yourself.
- The deduction, shown. The rate, the amount coming off, and the amount left to pay now.
- Your payment details, and your VAT number if you are registered.
The labour and materials split
Under the Construction Industry Scheme the contractor pays part of your invoice to HMRC instead of to you. It counts towards your own tax and National Insurance, so it is not lost, but it does come off the money reaching your account this month.
The deduction is worked out on the labour only. There are three rates, and which one you get is about your own status and not about the job:
- 20 percent if you are registered under the scheme and the contractor verifies you.
- 30 percent if you are not registered, or your details do not match when they check.
- 0 percent if you hold gross payment status, where you are paid in full and settle it all yourself.
Those two middle numbers are why the split is worth getting right. On £800 of labour the difference between 20 and 30 percent is £80 of your money sitting with HMRC until your return is filed.
A worked example
| Labour, five days | £800 |
|---|---|
| Materials you paid for | £200 |
| Invoice total | £1,000 |
| CIS deducted, 20 percent of the labour | £160 |
| To pay you now | £840 |
Nothing is deducted from the £200 of materials. On the 30 percent rate the deduction would be £240 and you would be paid £760. Had you put the whole £1,000 on one line as labour, the contractor would have had to deduct from all of it, and another £40 or £60 of your money would have gone to HMRC early.
What is never deducted from
Materials, consumable stores, plant you hired in from somebody else, fuel other than for travelling, and the cost of manufacturing or prefabricating materials. One rule sits behind all of them, in HMRC's guide at paragraph 3.12: what comes out of the sum is what you actually paid.
So charge materials at cost. A markup is not money you paid out, so it stays in the sum and is deducted from like labour. If the materials figure looks too big, HMRC go after the contractor for the tax that was not taken off. That is why a contractor may want your receipts.
VAT and the reverse charge
If you are both VAT registered and the work falls inside the scheme, the domestic reverse charge usually applies: you do not charge the VAT, the contractor accounts for it, and your invoice has to say so and show the VAT amount they are accounting for. It does not apply when the customer is the end user of the work, and then you charge VAT the ordinary way.
The deduction itself is worked out on your invoice without the VAT. If you are not VAT registered, the materials figure that comes out of the sum includes the VAT you paid at the wholesaler, because that was part of your cost.
What you should get back
Within fourteen days of the end of each tax month the contractor must send you a payment and deduction statement showing what was taken. Keep every one of them. They are what proves the deduction when your return is filed, and the gap between your invoice and your bank is explained by that statement and nothing else.
The invoice, made in the app
DRSaaS is the everything app for trades and service businesses. Book the work as a job and put your days and your materials on it. The invoice comes out with labour on one line, materials on another, your rate worked out, and the amount to pay now at the bottom.
It drafts half an hour after your working day ends. Nothing is sent until you tap send. Work direct for householders as well? The same account bills them the ordinary way, and the invoice app for tradesmen page has more.
No card. No trial clock. Free for every business until 500 are active on it. After that it is £49 a month for one person, and no account pays anything without 90 days written notice first. Your first 12 months are free whatever happens.
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