Why a CIS invoice is not an ordinary invoice
Under the Construction Industry Scheme a contractor deducts tax from what they pay a subcontractor and passes it to HMRC. The invoice total and the amount that arrives in the bank are therefore different numbers, and both need to be right. The deduction applies to the labour element, not to materials, which is exactly why the split has to be visible on the invoice rather than worked out afterwards.
This is general information, not tax advice. The rate is 20% if you are registered under the scheme, 30% if the contractor could not verify you, and 0% with gross payment status — and it comes off the labour element only. Which one applies to you is between you, HMRC and your accountant.
What that means on the page
Labour and materials split
Set out separately on every line, because the deduction only touches one of them.
Deduction shown
The gross figure, the deduction and the net payable, so the customer and your accountant see the same numbers.
Statements kept
Payment and deduction statements stay attached to the job instead of in a folder somewhere.
Reverse charge
VAT on much construction work is handled by the customer rather than charged by you. The invoice carries the line ‘Reverse charge: VAT Act 1994 Section 55A applies’, with the rate and the amount shown but not added to the total.
The part that costs money
Firms lose money on CIS in a quiet way: material costs that end up on the labour line get deducted from, and nobody notices until the year-end. Keeping the split at the point where the work is recorded — on the job, by the person who did it — is what stops that happening.
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Raise a CIS invoice and check the figures
Put in labour and materials, apply a deduction and see whether the numbers land where you expect.
Try 14 days free →Common questions
Does it verify subcontractors with HMRC?
Not directly — you verify on the HMRC service and record the verification number here. The rate you record (0, 20 or 30%) is then applied to the labour element on every invoice, and the statement comes out of the same figures. Direct verification is on the roadmap.
Does it file my CIS return?
No. It produces the figures and statements; filing stays with you or your accountant.
What if I am the contractor rather than the subcontractor?
Both sides show up: deductions you make on incoming work and deductions made from your own invoices.
Is this only for construction?
The scheme covers construction operations as HMRC defines them. Whether your work falls inside is a question for your accountant.