CIS invoice: an example, and four lines templates get wrong

A CIS invoice is an ordinary invoice built so the contractor can work out the deduction from it: labour on its own lines, materials at the cost you paid, third-party plant hire, travel shown as travel — and, between VAT-registered businesses in the CIS chain, no VAT in the amount payable but a reverse charge note. There is no prescribed form. The contractor deducts 20 per cent (30 if you are not registered, nothing with gross payment status) from everything except the direct cost of materials, and the invoice is where that line is drawn.

Most free templates draw it in the wrong place in at least one of four lines. The example below shows all four.

The example: a rewire for a main contractor

A VAT-registered electrician, registered for CIS at the standard rate, invoices a VAT-registered main contractor for a first-floor rewire. The contractor reports the job under CIS, so the domestic reverse charge applies.

Below the total, for information, because that is what the contractor will calculate:

Check: £3,720.00 − £534.00 = £3,186.00. With gross payment status the expected payment is the full £3,720.00; unverified at the higher rate it is £3,720.00 − £801.00 = £2,919.00.

Line one that goes wrong: materials at your price, not at cost

CIS 340 tells the contractor to deduct from the gross payment "the amount the subcontractor actually paid" for materials. In the example the electrician charges £1,050.00 for materials that cost £900.00. Only the £900.00 comes off before the deduction; the £150.00 mark-up is part of the £2,670.00 the 20 per cent applies to.

That is why the example shows the cost next to the charge. A template that has one "materials" line at the selling price leaves the contractor two options: deduct on the whole line, or ask you for receipts. The guide is explicit that the contractor "can ask the subcontractor for evidence of the direct cost of materials" and must "make sure that the part of the payment for materials supplied is not overstated" — and it is the contractor who carries any under-deduction, so expect to be asked.

Line two: travel is not materials

Paragraph 3.11 of CIS 340: "Any travelling expenses (including fuel costs) and subsistence paid to or on behalf of the subcontractor must be included in the gross amount of payment and the amount from which the deduction is made."

The £120.00 of mileage in the example is therefore deducted at 20 per cent like labour. Showing travel on its own line is still right — it is a true description of the supply — but it does not move it out of the calculation. Fuel is excluded only when it is not fuel for travelling, for example diesel for a hired mini-digger.

Line three: plant hire counts only if you hired it

Plant hired from a third party is treated as materials, together with consumables such as fuel to run it. Plant you own is not: "If the subcontractor owns the plant used in executing the work no notional deduction for plant hire may be made" (paragraph 3.14). A line "own scaffold, 4 days, £200" is part of the payment the deduction applies to, however it is worded.

Line four: VAT, which is never in the calculation

VAT is excluded from the CIS calculation in every case — CIS 340 tells the contractor to "work out the gross amount from which a deduction will be made by excluding VAT charged by the subcontractor". Between VAT-registered businesses in the CIS chain there is usually no VAT in the payment at all, because the domestic reverse charge moves it to the contractor.

HMRC's technical guide asks the invoice to "make it clear that the domestic reverse charge applies and that the customer is required to account for the VAT", and to state the VAT due — or, if that cannot be shown, the rate. Its three example wordings are "VAT Act 1994 Section 55A applies", "S55A VATA 94 applies" and "Customer to pay the VAT to HMRC". When the reverse charge does not apply — the contractor has told you in writing it is an end user, or the customer is not VAT-registered — the invoice charges VAT normally: Domestic reverse charge VAT: invoice example and when it applies.

If you are not VAT-registered

The invoice carries no VAT at all, and no reverse charge note. One detail changes in the calculation: the cost of materials you deduct includes the VAT you paid on them, because CIS 340 counts "VAT paid if the subcontractor is not registered for VAT". Materials bought for £900.00 plus £180.00 VAT are £1,080.00 of materials cost for the CIS calculation.

After the invoice: the statement is your evidence

The contractor must give you a written statement for every tax month in which it made a deduction, "within 14 days of the end of each tax month" — tax months run from the 6th to the 5th, so by the 19th. The statement shows the gross payment, the cost of materials it allowed and the amount deducted. Compare it with your invoice line by line: where the contractor allowed less than your materials cost, the difference has been deducted at 20 per cent.

Keep the statements. They are what you claim the deductions back with — on your Self Assessment as a sole trader, or against the company's PAYE as a limited company. Why the rate is 20, 30 or nothing, and how the monthly cycle runs, is in Construction Industry Scheme (CIS): 20, 30 or nothing; the stage-by-stage account around the invoice is in Invoice for building work: stages, variations, retention.

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Position as at 4 October 2026, checked against CIS 340 as updated on 27 August 2026, section 61 of the Finance Act 2004, SI 2007/46 and HMRC's reverse charge technical guide. What may change: HMRC revises CIS 340 several times a year without changing the Act — the "Updated" line at the top of the guide shows when. Check it before you rely on a paragraph number quoted here.

What Zirko does here: mark a customer as a CIS contractor and set your CIS status once (registered, not registered or gross payment status), and the invoice works out the deduction as CIS 340 does — the payment excluding VAT, less the direct cost of materials you enter for each item or take from your costing, times your rate, rounded down to the penny — and shows the amount payable after it. For items without a costing you decide the materials cost before the invoice can go out. When the contractor pays, you record the cash and the deduction it withheld, and the invoice counts as paid even if it deducted 30 per cent instead of 20; a monthly overview lists the gross payments, materials and deductions per tax month and contractor, so you can check each payment and deduction statement against it. Between VAT-registered businesses the domestic reverse charge note states the VAT the customer must account for. What Zirko does not do: it files no CIS return, verifies no subcontractors and does not print your UTR. For the job file around the invoice: Zirko for builders.