How to Invoice as a UK Trade Business: VAT, CIS and the Domestic Reverse Charge (2026)

A compliant UK trade invoice needs your business details, the customer’s details, a description of the work, the correct VAT treatment for that specific job, and, if you are a CIS subcontractor, the deduction worked out on labour rather than materials. Most invoicing mistakes in trade work come from applying one flat VAT rate to every job and guessing at the CIS deduction instead of calculating it, so this guide works through each part with a worked example you can copy.

What must legally appear on a trade invoice

Every invoice, VAT registered or not, needs a unique identifying number, your business name and address, the customer’s name and address, a clear description of the work carried out, the date the invoice was issued, the date the work was supplied if different, and the total amount owed, according to gov.uk’s guidance on invoicing and taking payment from customers.

Once you are VAT registered, or your customer requires one for their own VAT records, that basic invoice is not enough. HMRC’s VAT record-keeping notice sets out what a full VAT invoice must show: a sequential invoice number, the time of supply (the tax point) and the date of issue if that is different, your name, address and VAT registration number, the customer’s name and address, a description sufficient to identify what was supplied, the quantity and rate for each line, the VAT rate and net amount for each line, the total payable excluding VAT, and the total VAT chargeable in sterling. You must normally issue that VAT invoice within 30 days of making the supply, and keep a copy for at least 6 years.

There is a lighter version for small jobs. Where the total supply is £250 or less including VAT, HMRC allows a simplified invoice showing your name, address and VAT number, the time of supply, a description of the work, the VAT rate, and the total including VAT, without needing the customer’s details or a separate VAT figure. For most trade callouts and small repair jobs this simplified format is enough, but anything larger, or anything a VAT-registered customer needs for their own records, should carry the full set of details.

VAT rates that actually come up in trade work

Most trade work is standard-rated at 20%. That covers ordinary repairs, servicing, maintenance and most extensions or improvements to an existing home. Two situations bring the rate down, and one brings it to zero, and all three depend on the specific job rather than the trade doing it.

The 5% reduced rate. HMRC’s VAT Notice 708 sets out two conditions that come up regularly in trade work. The first is converting a building so it ends up with a different number of single household dwellings than it had before, for example turning a house into flats or several flats back into one house. The second is renovating or altering residential premises that have been empty for at least 2 years immediately before the work starts. Both conditions are specific: the dwelling count has to actually change for a conversion to qualify, and the 2-year vacancy has to be evidenced for an empty-property renovation to qualify. A routine renovation of an occupied home does not get the reduced rate just because it is residential work.

The 0% rate for energy-saving materials. Installing qualifying energy-saving materials, such as insulation, solar panels, and ground or air source heat pumps, in residential accommodation currently carries a temporary 0% VAT rate. Gov.uk states this runs until 31 March 2027, after which it reverts to the 5% reduced rate that applied before the temporary relief. If you install these materials, check the qualifying product list and the installation conditions in HMRC’s guidance before applying 0%, and note the date this drops back to 5% if you are quoting work that might land after March 2027.

The 0% zero rate for new dwellings. Constructing a genuinely new building designed as a dwelling, or a number of dwellings, is zero-rated, again subject to the conditions in VAT Notice 708. This only applies to new construction of a qualifying dwelling, not to extending, converting or renovating an existing one, which normally stays standard-rated unless the reduced-rate conditions above are met.

If you are not sure which rate applies to a job, the safest approach is to check the specific condition in VAT Notice 708 against the actual property and the actual scope of work, rather than assuming a reduced rate applies because the job feels similar to one that does.

CIS: who it applies to and how the deduction works

The Construction Industry Scheme applies to most construction work: site preparation, demolition, building, alterations, repairs, and the installation of systems such as heating, lighting, power, water and ventilation. Under CIS, a contractor deducts money from a subcontractor’s payments and passes it to HMRC as an advance payment toward that subcontractor’s tax and National Insurance.

You register as a contractor if you pay subcontractors for construction work, or if your business spends over £3 million on construction in the 12 months from your first payment, even if construction is not your main trade. You count as a subcontractor if you carry out construction work for a contractor. Subcontractor registration is not compulsory, but skipping it means a worse deduction rate.

There are three deduction rates. A subcontractor registered with HMRC for CIS gets 20% deducted. A subcontractor who is not registered, or whose details cannot be verified, gets 30% deducted. A subcontractor with gross payment status gets 0% deducted and is paid in full. Gross payment status requires passing three tests: a compliance test (tax paid and filed on time), a business test (construction work carried out in the UK through a UK bank account), and a turnover test of at least £30,000 net construction turnover per sole trader, or per partner or director, or £100,000 for the wider business.

The deduction is not applied to the whole invoice. Before working out the percentage, the contractor strips out VAT, consumable stores, fuel other than travel costs, plant hire, and materials the subcontractor bought directly for the job, provided that cost can be evidenced, typically with a receipt or supplier invoice. What is left after those deductions, in practice mostly the labour charge, is what the 20%, 30% or 0% rate applies to. Contractors must give subcontractors a payment and deduction statement within 14 days of the end of each tax month, showing what was deducted.

The domestic reverse charge for construction services

The VAT domestic reverse charge changes who accounts for VAT on qualifying construction supplies. It applies to standard or reduced-rated building and construction services reported within CIS, where both the supplier and the customer are VAT registered and CIS registered, and the customer is not the end user of the work.

Under the reverse charge, the supplier does not charge VAT on the invoice. Instead, the invoice must carry all the normal VAT invoice information plus a clear statement that the reverse charge applies, showing either the amount of VAT due or the rate that applies, without adding that VAT to the total the customer pays. HMRC’s technical guide suggests wording such as “Reverse charge: customer to pay the VAT to HMRC” or a reference to the underlying legislation, “VAT Act 1994 Section 55A applies.” The customer then accounts for that VAT on their own VAT return rather than paying it to the supplier.

The reverse charge does not apply to supplies of workers by employment businesses, and it does not apply where the customer is the end user, meaning they are not going on to supply the construction services onward as part of a construction business. HMRC’s guidance places the responsibility on the supplier: if a customer has not confirmed their end user status in writing, and they are VAT and CIS registered, the supplier should still apply the reverse charge rather than charge VAT in the normal way.

The single most common mistake is getting that end user question wrong in either direction. Charging VAT as normal to a genuine contractor customer, when the reverse charge should have applied, understates the supplier’s own VAT position and creates a correction later. Applying the reverse charge to a genuine end user, such as a homeowner who commissioned the work directly and is not part of the onward supply chain, means VAT that should have been charged was not, which is also a problem to unwind. Getting written confirmation of end user status before invoicing, or applying the reverse charge by default when a CIS and VAT registered business customer has not confirmed otherwise, avoids both.

A worked example invoice

Here is how labour, materials, VAT and a CIS deduction sit together on one invoice, using a subcontractor doing standard-rated construction work for a VAT and CIS registered main contractor, where the reverse charge applies.

The job. A registered subcontractor carries out electrical work as part of a contractor’s extension project. Labour comes to £950.00. The subcontractor also bought materials directly for the job, with receipts kept as evidence, costing £250.00. The same VAT, CIS and reverse charge mechanics apply whether the subcontractor is wiring an extension or, as a gas engineer would be, fitting a boiler on the same site: the deduction is worked out on labour either way, not on the trade doing it.

1. Build the net invoice total.

   Line	Amount
   Labour	£950.00
   Materials (bought directly, receipts held)	£250.00
   Net subtotal	£1,200.00

2. Apply the VAT treatment. This is standard-rated construction work between a VAT and CIS registered subcontractor and a VAT and CIS registered contractor who is not the end user, so the domestic reverse charge applies. No VAT is added to the invoice total. Instead, the invoice states the VAT position in words: “Reverse charge: customer to account for output tax of £240.00 to HMRC (20% of £1,200.00). VAT Act 1994 Section 55A applies.” The invoice total the contractor is billed remains £1,200.00.
3. Work out the CIS deduction. Before applying the CIS rate, the materials cost is removed from the deduction base because it was bought directly by the subcontractor and is evidenced by receipts. That leaves £950.00, the labour element, as the deduction base. The subcontractor is registered with HMRC for CIS, so the rate is 20%. 20% of £950.00 is £190.00.
4. Calculate the amount actually paid.

   Line	Amount
   Invoice total (net, reverse charge applies, no VAT added)	£1,200.00
   Less CIS deduction (20% of £950.00 labour)	(£190.00)
   Amount the contractor pays the subcontractor	£1,010.00

The subcontractor’s invoice shows £1,200.00 as the amount for the work, the reverse charge statement covering the £240.00 of VAT the contractor will self-account for, and a CIS deduction statement showing £190.00 deducted, leaving £1,010.00 actually paid. The contractor issues the subcontractor a payment and deduction statement confirming that £190.00 figure within 14 days of the end of the tax month.

How software removes the manual arithmetic

Getting the sequence above right by hand, correctly split materials from labour, apply the right VAT rate or reverse charge treatment, then calculate the CIS percentage on the right base, and get the wording right, is where trade invoicing goes wrong. A misapplied VAT rate or an incorrectly calculated CIS deduction is not a small error to fix later; it is a figure that flows into a VAT return or a subcontractor’s tax record.

Checker records VAT at 20%, 5%, 0% and exempt directly on the invoice, alongside CIS deductions, credit notes and part-payments, so the rate and the deduction are set once per line rather than recalculated by hand on every job. Every invoice and payment then flows automatically both ways between Checker and Xero, QuickBooks or Sage: raise the invoice in Checker and it appears in the accounts, reconcile the payment in Xero and Checker reflects it. For a subcontractor or contractor issuing CIS invoices regularly, that two-way sync means the deduction and VAT treatment recorded on the job matches what shows up in the accounts, without re-entering figures at the end of the month.

This sits on Checker’s Pro plan, at £19.99 a month, which adds the accountancy sync on top of the unlimited invoicing, quoting and job sheets already included on the Lite plan at £10.99 a month. Pro also runs the invoice chaser automatically once payment terms expire, and the annual service reminder for trades with recurring maintenance or compliance work, so a correctly invoiced job this month also sets up the next one to chase itself. The trial does not need card details, so it is possible to raise a real invoice with a VAT rate and CIS deduction on it before deciding which plan fits.

Frequently asked questions

Authoritative sources

1. GOV.UK: invoices, what they must include
2. GOV.UK: record keeping for VAT, Notice 700/21
3. GOV.UK: VAT on energy-saving products
4. GOV.UK: buildings and construction, VAT Notice 708
5. GOV.UK: what is the Construction Industry Scheme
6. GOV.UK: deductions your contractor makes
7. GOV.UK: make deductions and pay subcontractors
8. GOV.UK: gross payment status
9. GOV.UK: VAT domestic reverse charge for building and construction services
10. GOV.UK: how to use the VAT reverse charge for building and construction services
11. GOV.UK: VAT reverse charge technical guide

This guide is general information about UK VAT and CIS rules, not tax advice. Confirm the current rates, thresholds and conditions against HMRC guidance for the specific job before invoicing.