You’ve finished the job. Good week’s work. Now you need to invoice — and suddenly you’re not sure what to put on it.
Do you add VAT? Do you not add VAT? Is CIS going to come off what they pay you? How much? Does it matter whether it’s a domestic job or a commercial one?
I’ve been there. First time a main contractor paid me short on a CIS job, I thought they’d made a mistake. I called them up, had the awkward conversation, and then found out at year end that the money had gone to HMRC in my name all along. Nobody had explained it. I just didn’t know.
I’m a painting and decorating contractor. When I started working for main contractors on commercial jobs, the whole CIS and VAT reverse charge thing was genuinely confusing. HMRC’s guidance reads like it was written for accountants. And every time I asked someone I’d get a slightly different answer.
So here it is in plain English. What it means, when it applies, and what your invoice should actually look like.
Whether you’re a painter, a plasterer, a sparky, a plumber, a tiler, a joiner, a groundworker, a bricklayer, a roofer or a decorator — if you work as a subcontractor for main contractors or other trade businesses, this is what you need to know.
There are two separate things here that often apply at the same time:
CIS — the Construction Industry Scheme. Your contractor deducts tax from the labour part of your invoice before paying you. It goes to HMRC in your name. You claim it back at year end.
The domestic VAT reverse charge — when this applies, you don’t add VAT to your invoice at all. Your contractor accounts for the VAT themselves directly to HMRC. Your invoice is for the net amount only.
They’re separate rules. But on commercial construction jobs, both often apply to the same invoice.
CIS affects the amount you actually get paid. When you invoice a CIS contractor for labour, they deduct tax from the labour element before they pay you. Not from the whole invoice — just the labour. Materials aren’t touched.
The rate they deduct depends on your CIS status:
So if you’re a plasterer and you invoice for £2,000 labour and £500 materials, a CIS contractor paying you at 20% will pay you £2,100. They keep back £400, which goes to HMRC in your name. You’re not losing it — you claim it back when you do your self-assessment.
The important thing: the deduction only comes off the labour. If you split your invoice clearly — labour on one line, materials on another — there’s no argument about it. If everything’s lumped together, the contractor might deduct CIS from the whole lot. Make it easy for them and make it easy for yourself.
Gross payment status is worth chasing if you work regularly for CIS contractors. It means you get paid the full invoice amount every time and handle your own tax once a year. You need to apply to HMRC and demonstrate a clean tax record, but once you’ve got it, it makes a real difference to your cashflow.
The domestic reverse charge came in March 2021. It sounds complicated but the practical effect is simple: when it applies, you invoice without VAT.
Instead of writing £2,000 + £400 VAT = £2,400, you write £2,000 and add a note: “Domestic Reverse Charge applies — customer to account for VAT to HMRC.” Your contractor then accounts for the VAT themselves in their own VAT return.
When does it apply to your invoice?
It applies when all of the following are true:
Number 5 is where people go wrong.
An end user is the person who actually uses the building or space — a homeowner, a business occupying their own premises. If you’re invoicing an end user, reverse charge doesn’t apply and you add VAT as normal.
A main contractor or any business that’s going to pass your work on as part of a bigger construction project — that’s not an end user. Reverse charge applies.
Some examples:
Not sure? Ask the contractor before you invoice. A quick “do you want me to apply the domestic reverse charge?” takes ten seconds and avoids a messy conversation about the invoice later.
When both CIS and the reverse charge apply — which is common on commercial work — your invoice looks like this:
Labour: £2,000
Materials: £500
Total: £2,500
Domestic Reverse Charge applies — customer to account for VAT to HMRC
CIS applicable to labour element
You invoice £2,500. Your contractor deducts £400 CIS from the labour, pays you £2,100, and passes £400 to HMRC in your name.
No VAT changes hands on the invoice itself. The contractor accounts for it on their return. You don’t see it and you don’t need to.
The reverse charge quietly changed the cashflow reality for a lot of subcontractors when it came in 2021.
Before it, if you were VAT registered and invoicing a main contractor for £10,000, you’d send an invoice for £12,000. You’d collect £12,000. You’d hold that £2,000 VAT for up to three months until your next VAT return. Quietly, that £2,000 was working for your cashflow — it was money sitting in your account that you could use.
The reverse charge took that away. You invoice for £10,000. You get paid £10,000 minus any CIS deduction. No VAT collected, no float.
If you’ve noticed your cash position feeling tighter since 2021 on commercial jobs and couldn’t quite put your finger on why — that’s part of it.
When you raise an invoice in Grafter Lab, you can mark a customer as CIS with reverse charge. Every invoice you create for that customer automatically applies the right settings — no VAT, correct wording, CIS shown clearly on the labour line so your contractor can see exactly what they should be deducting and from what. You set it once and it just works.
Is the customer a CIS contractor? Yes → CIS applies to the labour element of your invoice.
Is the customer VAT registered, a CIS contractor, and not an end user? Yes → domestic reverse charge applies. Don’t add VAT. Add the correct wording.
Is the customer a homeowner or an end-user business? No to the above → add VAT as normal.
Not sure? Ask. It’s a two-second question that saves a lot of hassle.
One app for quotes, invoices, job tracking, cashflow forecasting and your whole team. Built by a UK trade contractor who got fed up of figuring this stuff out the hard way. No per-user fees. No card required.
Start your free 30-day trial