CIS and the VAT reverse charge on subcontractor invoices

By Randall Strickland · Updated 22 October 2026 · 3 min read

If you’re a UK subcontractor working for a contractor, two rules change what your invoice says and what lands in your bank: the Construction Industry Scheme (CIS) and the VAT domestic reverse charge. Neither is complicated once you’ve seen one invoice laid out properly. Here’s how they fit together.

CIS in one minute

Under CIS, a contractor paying a subcontractor for construction work takes a deduction from each payment and pays it to HMRC as an advance on the subcontractor’s tax and National Insurance. The rate depends on your status with HMRC:

The deduction comes off the labour part of the payment only. It doesn’t apply to VAT, or to the cost of materials you bought for the job (HMRC’s definition of materials also covers things like consumables and plant hire). That’s why it pays to show labour and materials separately on your invoice: if you don’t, the contractor may take the deduction from the whole amount.

The contractor reports what they paid and deducted on their monthly CIS return and gives you a statement. Keep those statements: sole traders claim the deductions back through Self Assessment, and limited companies set them against what they owe HMRC through payroll.

The VAT domestic reverse charge

Since 1 March 2021, when a VAT-registered subcontractor supplies construction services to a VAT-registered contractor, and the payment is reported under CIS, the customer accounts for the VAT instead of you. You still put the VAT rate on your invoice, but you don’t add the VAT to the amount due. The contractor pays that VAT to HMRC on their own return and, normally, reclaims it on the same return.

It doesn’t apply when you work for an end user (for example a developer or building owner who has told you in writing that they’re the end user), or for a homeowner. Then you charge VAT the normal way.

A reverse charge invoice should say clearly that the reverse charge applies, for example: “Domestic reverse charge for construction services: customer to account to HMRC for the VAT.”

A worked example

You’re a registered CIS subcontractor, VAT-registered, invoicing a main contractor £10,000 for this month’s work: £6,000 of labour and £4,000 of materials you bought.

If the contractor also holds retention, say 5%, that comes off too: £500 held back until practical completion or the end of the defects period, depending on your contract.

Common mistakes

• One lump sum. Without a labour figure, the contractor can’t tell what’s exempt and may deduct from everything.
• Adding VAT anyway. If the reverse charge applies and you add VAT, the contractor will (rightly) send the invoice back.
• Reverse charging an end user. If you didn’t get end-user confirmation, ask. Getting it wrong means correcting invoices later.
• Losing CIS statements. They’re your evidence for the tax you’ve already paid.

How JobFigure handles it

Set your country to the United Kingdom and JobFigure works in pounds with UK wording (variations, retention, labour). In Company Profile you add your VAT number and tick “I work as a subcontractor under CIS.” Then each invoice has a labour figure, a CIS rate (20%, 30% or 0%) and a reverse charge box, and the invoice prints the VAT line, the reverse charge wording, the CIS deduction, any retention and the amount due, like the example above.

This is a plain-English summary, not tax advice. HMRC’s guidance on CIS (CIS340) and on the VAT domestic reverse charge for building and construction services has the full rules; check anything unusual with your accountant.

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