Subcontractor Invoice UK — What to Include, How to Handle CIS Deductions, and VAT Rules (2026)

Invoicing a main contractor is not the same as invoicing a domestic customer. When you work as a subcontractor within the construction industry, additional rules apply that don't exist on a normal trade invoice: the Construction Industry Scheme changes what gets deducted and by whom, VAT rules may shift the entire tax accounting responsibility to the contractor, and there are specific fields the contractor needs to process your invoice correctly. Get it wrong and you delay payment, trigger compliance issues, or — worse — end up with CIS deducted at the wrong rate.

This guide covers everything you need to know about subcontractor invoicing in the UK in 2026: what must be on every invoice, how CIS deductions work in practice, when the domestic reverse charge applies and what it means for your invoice, and how to handle the edge cases.

What Every Subcontractor Invoice Must Include

These fields are required on any invoice you raise as a subcontractor. Missing any of them can result in the contractor holding payment while they chase the information.

• Your business name and trading address — the legal name you trade under and your registered or principal place of business address.
• Invoice number — must be sequential and unique. Contractors' accounts departments use this for matching purchase orders and for audit trails. Gaps in your sequence can raise questions.
• Date of invoice — the date you issue it, not the date the work was done (though those may be the same).
• Description of work — specific enough that the contractor's accounts or project manager can code it to the right job, cost centre, or project. "Groundworks, Plot 14, Barnsley Road development" is useful. "Labour" alone is not.
• Net amount for labour — separated out explicitly, because CIS applies only to labour. This must be its own line.
• Net amount for materials — if you have supplied materials, this must also be a separate line. CIS does not apply to materials, so the split protects you from over-deduction.
• Your UTR (Unique Taxpayer Reference) — this is mandatory under CIS. The contractor must verify you with HMRC using your UTR before making any payment, and it needs to appear on your invoice.
• Your VAT registration number — if you are VAT registered. Even under reverse charge (where you charge no VAT), your VAT number must appear on the invoice.

How CIS Deductions Actually Work

The Construction Industry Scheme requires main contractors to deduct tax at source from payments made to subcontractors and pay it directly to HMRC on your behalf. This is not something you do on your invoice — it's something the contractor does when they pay you.

Before paying you, the contractor verifies you with HMRC via the CIS Online service. HMRC confirms your registration status and the rate that applies: 0% for gross payment status holders, 20% for standard registered subcontractors, and 30% for subcontractors who are not registered with CIS at all. Most registered subcontractors are on 20%.

The deduction applies only to your labour charge. Materials are excluded. This is precisely why your invoice must separate the two figures clearly — if the contractor cannot distinguish labour from materials, they may apply CIS to your entire invoice total, costing you money that you then have to reclaim.

Your invoice does not need to show the CIS deduction itself. You raise the invoice for the full gross amount. The contractor deducts CIS when they make payment. Within 14 days of the end of each tax month, the contractor must give you a written CIS payment and deduction statement confirming what they paid you, what they deducted, and at what rate. Keep every one of these — they are the evidence you use to claim back the deductions via Self Assessment (sole trader) or your CT600 (limited company).

Worked Example — Standard CIS Deduction

Suppose you invoice a main contractor for groundwork on a commercial project:

• Labour: £2,000
• Materials: £400
• Total gross invoice: £2,400

The contractor verifies you at 20%. They deduct 20% of the labour only: 20% × £2,000 = £400. They pay you £2,000 (being £1,600 net labour after CIS + £400 materials in full) and pay £400 to HMRC as your advance tax payment. That £400 is not lost — it sits against your tax liability and you recover it at the end of the tax year.

VAT Rules — The Domestic Reverse Charge

If you are VAT registered and working within CIS scope, there is an additional VAT rule you must understand: the domestic reverse charge for construction services, which came into effect in March 2021 and remains in force in 2026.

Under the domestic reverse charge, you do not add VAT to your invoice in the normal way. Instead, the accounting responsibility for VAT shifts to the contractor. You issue the invoice showing the net amount and annotate it to make the reverse charge explicit. The contractor then accounts for both the output VAT (as if they had charged it to themselves) and the input VAT (which they reclaim in the same VAT return). For them it is largely neutral. For you, it means you collect no VAT and pay no VAT — but you must still show the VAT number and the relevant annotation.

When the Reverse Charge Applies

• You are VAT registered.
• The contractor (customer) is also VAT registered.
• The services are within CIS scope (most construction, groundwork, electrical, plumbing, heating, roofing, and associated trades).
• The supply is not to an end customer (i.e. the contractor will themselves be making a further taxable supply of construction services, not just using the work for their own occupied building).

Required Annotation

Your invoice must clearly state: "Reverse charge — customer to account for VAT to HMRC" and indicate the rate that would otherwise have applied (e.g. 20%). The VAT line on your invoice should show £0.00. The total due is the net amount only.

When the Reverse Charge Does NOT Apply

• You are not VAT registered — issue a normal invoice with no VAT. No annotation needed. You simply cannot charge VAT.
• The contractor is not VAT registered — normal VAT rules apply. You add VAT at the standard rate (20%) and the contractor pays it to you. You then account for it on your VAT return as normal output tax.
• End-user supplies — if you are working directly for a business that will occupy and use the building themselves (not pass it on via construction services), the end-user exception may apply. This is a specific carve-out that requires the end-user to notify you in writing. If in doubt, seek advice before invoicing without reverse charge to a VAT-registered party.

Non-VAT Registered Subcontractor Invoicing

If you are below the VAT registration threshold (£90,000 rolling 12-month turnover as of 2026), invoicing is simpler. You list your labour and materials separately, total them up, and that's your invoice. No VAT is charged, no reverse charge annotation is needed.

Your UTR still needs to be on the invoice for CIS purposes. The contractor still deducts CIS at the applicable rate from your labour, and still provides you with a CIS deduction statement after the tax month ends.

The key thing to watch: if your turnover approaches or exceeds £90,000 in any rolling 12-month period, you are legally required to register for VAT. Once registered, the reverse charge rules apply on your next invoice to a VAT-registered contractor — you do not wait until the next tax year. Failing to register on time creates a backdated VAT liability, which can be significant.

Example Invoice Layout (VAT-Registered Subcontractor, Reverse Charge)

Here is what a compliant invoice looks like for a VAT-registered subcontractor doing CIS-scope work for a VAT-registered main contractor:

What to Do If the Contractor Deducts the Wrong CIS Rate

Know your own CIS rate. You can check it by logging into HMRC's CIS Online service. If you are registered with CIS and have kept your tax affairs up to date, you should be on 20%. If you hold gross payment status, the rate is 0% and no deduction should be made at all.

If a contractor deducts 30% when you are a verified 20% subcontractor, they have made an error. Query it in writing immediately. They need to re-verify you with HMRC — the 30% rate is applied when the contractor cannot verify you, which usually means they have the wrong UTR or your CIS registration has lapsed. Provide them with your UTR again and ask them to run the verification check.

Either way, the excess deduction is not lost permanently. Whether 20% or 30% was deducted, it all gets reconciled against your actual tax liability when you file your Self Assessment or CT600. But it does affect your cash flow in the meantime, so it is worth resolving quickly. Keep a log of every CIS deduction statement you receive — these are your records if there is ever a discrepancy with what HMRC has on file.

Materials on Subcontractor Invoices

Only claim materials you have genuinely purchased and supplied. Inflating materials figures to reduce the CIS-applicable labour charge is tax fraud and HMRC does investigate it, particularly in industries where margins and material costs are well understood.

Keep all purchase receipts for materials you include on subcontractor invoices. A contractor's accounts team or their own auditors can request evidence of your material costs — this is not common but it does happen on larger contracts, particularly in public sector or housing association work. If you cannot produce receipts, the contractor may have grounds to apply CIS to the full invoice value including the materials line.

Practical tip: where you buy materials specifically for a named job, note the job reference on the receipt when you buy them. It makes reconciliation much faster if questions arise later.

Payment Terms and Your Rights Under the Construction Act

Always state your payment terms on the invoice. "Payment due within 14 days" is standard in construction subcontracting, though you can negotiate longer or shorter terms. Whatever is agreed, put it on every invoice.

If you are working under a subcontract for commercial construction work, the Housing Grants, Construction and Regeneration Act 1996 (commonly called the Construction Act) gives you statutory rights that many subcontractors do not know they have. These include the right to receive stage payments on longer contracts (the contractor cannot make your entire payment conditional on project completion), the right to a "pay less notice" in writing if the contractor intends to pay less than your invoice amount, and — critically — the right to suspend work if the contractor fails to pay without proper notice. Suspension must be preceded by seven days' written warning, but it is a powerful remedy for non-payment.

When the contractor sends you a CIS deduction statement, acknowledge receipt in writing. A quick email is sufficient. It creates a clear record that you received the statement on a specific date, which matters if you later dispute the figures.

Using Accounting Software for CIS Subcontractor Invoicing

Xero, QuickBooks, and FreeAgent all include CIS modules in their UK versions. These automate the more tedious aspects of CIS record-keeping: they let you set up contacts as CIS contractors, track deduction statements received, and feed the accumulated deductions directly into your tax position so you can see at any point in the year how much of your tax liability is already covered.

For VAT, all three platforms support reverse charge VAT codes. Apply the correct code when raising a subcontractor invoice and the VAT return handles the treatment automatically — the invoice appears in the correct boxes without you needing to manually adjust your VAT return. If you are switching from standard-rated invoicing to reverse charge (because you've recently crossed the VAT threshold), make sure you update your customer settings in the software as well as the individual invoice.

The time savings are real. Manually tracking CIS deductions across multiple contractors, cross-referencing deduction statements, and computing your year-end CIS position by hand is slow and error-prone. Software that handles it automatically pays for itself quickly — and reduces the risk of filing errors on your Self Assessment or CT600.