Builder's Playbook · England · UK05
CIS deductions and VAT reverse charge
Educational, not legal or tax advice. Check your contract and the current law (England and Wales).
5 points
Verify every new subcontractor before paying
Verify with HMRC before the first payment. HMRC tells you the rate: 20% if registered, 30% if not, nothing with gross payment status. Re-verify if they haven't been on your return in the current or last two tax years (Finance Act 2004 s.61; SI 2007/46; HMRC CIS contractor guidance).
Deduct on all but materials and VAT
Take off VAT, and the materials, consumables, fuel (not travel), hired plant and prefabrication the subcontractor paid for. Deduct the rate from everything else, including its profit and its own plant. Keep the gross and materials figures excluding VAT (FA 2004 s.61(1); HMRC CIS guidance).
Return and statements by the 19th
Tax months run from the 6th to the 5th. File the monthly return and give each subcontractor a payment and deduction statement by the 19th after the tax month ends, and pay HMRC by the 22nd if you pay electronically. From 6 April 2026 a month with no payments needs a nil return, unless you told HMRC at least 14 days before that month (HMRC CIS guidance; SI 2026/289).
Reverse charge: no VAT charged, wording shown
Between VAT-registered businesses, for construction services reported under CIS at the standard or reduced rate, the customer accounts for the VAT. The subcontractor's invoice shows the VAT or the rate but doesn't charge it, and says the reverse charge applies, for example "Reverse charge: Customer to pay the VAT to HMRC". Send back an invoice that charges it (VATA 1994 s.55A; SI 2019/892; HMRC reverse charge technical guide).
Keep the end-user confirmation on file
The reverse charge doesn't apply to a supply to an end user, or to a qualifying intermediary supplier, that has confirmed its status in writing, or by a written agreement. Then normal VAT is charged. Keep the written confirmation with the contract (SI 2019/892 art. 8).