UK Contractor & CIS Invoice Guide: What Every Subcontractor Needs to Know

Introduction

If you work in construction in the United Kingdom — whether as a subcontractor billing a main contractor, or as a sole trader taking on building work — you need to understand two things: standard UK invoice requirements and the Construction Industry Scheme (CIS). Getting either wrong can delay payment, trigger HMRC compliance issues, or result in the wrong tax deduction being applied.

This guide covers both in full: what goes on a UK invoice, how CIS deductions work, how VAT interacts with CIS, and how to produce a compliant CIS invoice quickly using InvoiNova's free UK contractor tool.

Quick Answer: A CIS invoice must show the gross labour amount and materials separately, then deduct the CIS amount (typically 20% of labour only) to arrive at the net payment due. VAT is charged on top of the gross total before the CIS deduction. Show your UTR number and confirm your CIS registration status. InvoiNova's UK contractor invoice tool handles the withholding calculation automatically — enter labour and materials as line items, set the withholding rate to 20%, and download a HMRC-ready PDF.

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What Is the Construction Industry Scheme (CIS)?

The Construction Industry Scheme is an HMRC tax scheme that requires contractors in the UK construction industry to deduct money from payments made to subcontractors and pass those deductions directly to HMRC. The deductions count as advance payments toward the subcontractor's Income Tax and National Insurance contributions.

Who is a contractor under CIS?

• Any business that pays subcontractors for construction work
• Property developers and housing associations spending more than £3 million on construction in any 12-month period
• Mainstream contractors in building, civil engineering, demolition, installation of heating/plumbing/electrical, painting and decorating

Who is a subcontractor under CIS?

• Any individual, partnership, or company paid by a contractor to carry out construction work
• Sole traders, limited companies, and partnerships all fall under CIS if they are doing construction work for a contractor

CIS does not apply to employed workers — if HMRC deems the relationship to be employment, PAYE rules apply instead. For genuinely self-employed subcontractors, CIS applies.

For full scheme details, see HMRC's CIS guidance.

CIS Deduction Rates

Contractors must verify every subcontractor's status with HMRC before making the first payment. The verification result determines the deduction rate:

Status	Deduction Rate	Who It Applies To
Gross Payment Status (GPS)	0%	Subcontractors verified by HMRC as tax-compliant — paid in full, no deduction
CIS-Registered	20%	Subcontractors registered with HMRC under CIS (standard rate)
Unregistered	30%	Subcontractors not registered with HMRC — higher rate applies

The deduction is calculated on labour only — not on materials. This is one of the most commonly misunderstood rules. If your invoice includes both labour and materials, the contractor deducts CIS only from the labour portion. This is why your invoice must separate labour and materials clearly.

Example:

• Labour: £1,000
• Materials: £400
• Gross total: £1,400
• CIS deduction (20% of £1,000 labour): £200
• Net payment due: £1,200

To verify your status, contractors call the HMRC CIS helpline (0300 200 3210) or use the online verification service with your UTR (Unique Taxpayer Reference) and National Insurance number.

What a CIS Invoice Must Include

A valid UK invoice must meet HMRC's standard invoicing requirements. A CIS invoice must also show the deduction calculation clearly. Here is the complete list:

Standard UK invoice fields:

1. The word "Invoice" (or "Tax Invoice" if VAT-registered)
2. A unique invoice number
3. Your name (or business name) and address
4. The client's (contractor's) name and address
5. Invoice date and tax point date (date the service was supplied)
6. Description of work done
7. Payment terms and due date
8. Your payment details (bank account, sort code)

CIS-specific additions: 9. Your UTR number (Unique Taxpayer Reference, issued by HMRC) 10. Your National Insurance number (for sole traders) 11. Gross labour amount — the full labour cost before deductions 12. Materials amount — listed separately from labour 13. CIS deduction — the amount withheld (e.g., 20% × gross labour) 14. Net payment due — the amount the contractor will actually pay you

If VAT-registered, also include: 15. Your VAT registration number 16. The VAT rate applied and VAT amount as separate lines 17. The gross total including VAT

See what to include in an invoice for the full general UK invoicing checklist.

CIS Invoice Example

Below is a correctly structured CIS invoice for a VAT-registered subcontractor at the standard 20% deduction rate:

INVOICE
Invoice No.:  INV-2026-047
Date:         11 May 2026
Tax Point:    11 May 2026

From:
  J. Smith Brickwork Ltd
  12 Builder Street, Manchester M1 1AA
  UTR: 1234567890
  VAT No.: GB 123 456 789

To:
  Main Contractor Ltd
  45 High Street, London EC1A 1BB

─────────────────────────────────────────────
Description                           Amount
─────────────────────────────────────────────
Brickwork & masonry — labour         £2,000.00
Materials (bricks, mortar, etc.)       £600.00
─────────────────────────────────────────────
Gross Total (excl. VAT):             £2,600.00
VAT (20%):                             £520.00
─────────────────────────────────────────────
Total Including VAT:                 £3,120.00

CIS deduction (20% × £2,000 labour):  £400.00
─────────────────────────────────────────────
Net Payment Due:                     £2,720.00
─────────────────────────────────────────────

Payment: Bank transfer to J. Smith Brickwork Ltd
Sort Code: 00-00-00 | Account: 12345678
Payment Terms: 30 days from invoice date

Note that VAT is calculated on the full gross (labour + materials) — the CIS deduction does not reduce the VAT-able amount. The contractor pays £2,720 to the subcontractor and £400 to HMRC on their behalf.

VAT and CIS: How They Interact

VAT and CIS are independent calculations. VAT is added on top of the gross invoice amount; CIS is subtracted from the net payment. They do not cancel each other out.

The order of calculation:

1. Labour + Materials = Gross (excl. VAT)
2. Gross × VAT rate = VAT amount
3. Gross + VAT = Total including VAT
4. Labour × CIS rate = CIS deduction
5. Total including VAT − CIS deduction = Net payment due

Domestic Reverse Charge (DRC)

Since 1 March 2021, the domestic VAT reverse charge applies to most construction services between VAT-registered businesses in the construction supply chain. Under the DRC:

• The subcontractor does not charge VAT on the invoice
• The contractor self-accounts for the VAT (adds it to their own VAT return)
• The subcontractor's invoice must include the note: "Reverse charge: VAT Act 1994 Section 55A applies"

The DRC applies when:

• Both contractor and subcontractor are VAT-registered
• The services are CIS-liable (standard-rated construction services)
• The contractor is not the end customer (i.e., they will pass the work on)

The DRC does not apply to zero-rated services, to end customers, to connected businesses within the same corporate group, or to supplies above the CIS scope.

If you are unsure whether DRC applies to your invoices, check HMRC's reverse charge guidance or consult an accountant. Getting this wrong means either under-charging VAT (HMRC liability) or over-charging it (client confusion and accounting errors).

For a full VAT guide, see how to add VAT to an invoice.

Gross Payment Status: What It Means for Your Invoice

If you have been granted Gross Payment Status (GPS) by HMRC, no CIS deduction applies. You invoice the full amount and receive full payment — there is nothing to withhold.

GPS is granted to subcontractors who meet HMRC's compliance tests:

• Turnover test: at least £30,000/year for sole traders; £30,000 per director for companies; and no more than 20% of income from connected parties
• Tax compliance: up-to-date tax returns, no outstanding tax liabilities, no serious criminal convictions

GPS subcontractors still need to show their UTR on invoices and still carry out work subject to CIS. The only difference is that no deduction applies. Your invoice section looks like:

Gross Total:      £2,600.00
VAT (20%):          £520.00
─────────────────────────
Total Due:        £3,120.00

CIS: Gross Payment Status — no deduction applies
UTR: 9876543210

GPS must be renewed every three years and can be withdrawn if HMRC determines you are no longer compliant. Contractors must still verify GPS status before paying.

Creating a CIS Invoice with InvoiNova

InvoiNova's UK contractor invoice tool is pre-configured for CIS invoicing:

• Currency: GBP (pre-set)
• Withholding rate field: set to 20% by default (adjustable to 30% or 0%)
• Line items: pre-populated with Labour, Materials, and Project Management
• Notes: pre-filled with "CIS registered contractor. Deduction applied at standard 20% rate."
• PDF download: instant, no account required

Step-by-step:

1. Open the UK contractor invoice tool
2. Fill in your details (name, address, UTR) in the From section — use Custom Fields to add your UTR number
3. Enter the contractor's details in the To section
4. Add your labour as a line item (e.g., "Brickwork — labour")
5. Add materials as a separate line item
6. Set the Withholding Rate to your applicable CIS rate (20% standard, 30% unregistered, 0% GPS)
7. If VAT-registered, set the VAT rate to 20% on each line (or 0% if DRC applies, with note in the Notes field)
8. Click Download PDF — the invoice shows the gross total, VAT, CIS deduction, and net payment due

For sole traders who work mostly independently and occasionally take on subcontract work, the UK freelancer invoice tool is also available. For full UK invoicing without CIS, use the UK invoice generator.

All invoices are stored locally in your browser — no data is sent to any server. See our invoice history feature for details.

Common CIS Invoicing Mistakes

• Applying CIS deduction to materials — the deduction is on labour only; materials are excluded
• Missing UTR on the invoice — contractors must record your UTR for their own CIS returns; without it, they may apply the 30% rate
• Wrong VAT treatment — charging VAT when DRC applies, or not charging it when it should apply
• Not separating labour and materials — if line items are bundled, the contractor may deduct CIS on the full amount by default
• 30% deduction due to non-verification — always confirm with the contractor that they have verified your CIS status before the first payment
• GPS expiry — Gross Payment Status expires every three years; if you do not renew, contractors will start deducting 20%
• Charging VAT to a non-VAT-registered end customer and applying DRC — DRC only applies when both parties are VAT-registered

Create Your CIS Invoice Now

InvoiNova's UK contractor tool is free, requires no account, and generates a print-ready PDF in under two minutes. The withholding deduction, VAT, and net payment calculations are handled automatically.

Open the UK contractor invoice tool and download your first CIS-compliant invoice today.