cis reverse charge quote
VAT, CIS and the Reverse Charge: Quoting Right for UK Trades
This is the one that makes most tradespeople's eyes glaze over, so I'll keep it plain. VAT, CIS and the domestic reverse charge are three separate things that can all land on the same quote, and muddling them is a quick way to short yourself or land in bother with HMRC. Short version: work out your VAT band, check whether CIS bites, and check whether the reverse charge applies - then show each one clearly on the quote.
One thing first: this is general guidance, not formal tax advice. Always check your own situation with HMRC or your accountant. Right, let's get into it.
The VAT bands, plain and simple
If you're VAT-registered, every job sits in one of three bands. Most day-to-day domestic work is standard-rated, but the others exist and can genuinely save your customer money on the right job:
- Standard rate (20%) - the default for most work and most materials
- Reduced rate (5%) - certain qualifying work, e.g. some energy-saving installs and certain residential conversions
- Zero rate (0%) - specific cases such as some work on new-build dwellings
The reduced and zero rates come with proper conditions and are easy to get wrong. Charge 20% when it should've been 5% and you've overcharged your customer; charge 5% when it should've been 20% and HMRC will want the difference from you, not them. If you think a job might qualify, that's the moment to check the detail.
Where CIS comes in
CIS - the Construction Industry Scheme - is a different beast and people muddle it with VAT constantly. It's about a contractor deducting money from a subcontractor's payment and passing it to HMRC as an advance towards that subcontractor's tax and National Insurance.
The key bit for quoting: CIS deductions come off the labour element only, never the materials. The standard deduction is 20% for registered subcontractors, or 30% if you're not registered - a good reason to register. CIS only applies contractor-to-subcontractor within construction. Doing a job direct for a homeowner? CIS doesn't come into it.
The domestic reverse charge explained
This is the one that threw everybody when it came in. The reverse charge changes who pays the VAT over to HMRC on certain construction services between VAT-registered businesses that fall under CIS.
Normally you charge VAT, collect it, and pay it to HMRC. Under the reverse charge you don't collect it - the customer (the contractor you're working for) accounts for it themselves. You still show the VAT details, but you don't add the VAT amount to what they pay you. It applies when all of these are true:
- Both you and your customer are VAT-registered
- The work falls within the scope of CIS
- Your customer is not the end user (so not the homeowner - a contractor further up the chain)
- The supply is at the standard or reduced rate, not zero-rated
So for everyday domestic work direct with a homeowner, the reverse charge does not apply - you charge VAT as normal. It's specifically for the VAT-registered subbie-to-contractor situation.
How to show it all clearly on a quote
However the rules land, your customer should read the figures and get them at a glance. For a standard VAT job, a clean breakdown looks like this:
- ✓ Labour and materials shown separately
- ✓ The net (pre-VAT) total
- ✓ The VAT rate and amount on its own line
- ✓ The gross total to pay
- ✓ Your VAT number
For a reverse charge job, show the VAT rate that applies but don't add the VAT to the total - instead add a clear line such as: 'Domestic reverse charge applies - customer to account for VAT to HMRC.' For a CIS job, make clear the deduction comes off the labour element so there are no surprises when they pay.
Where new tradies get this wrong
- Mixing up CIS and VAT. They're separate. CIS is a deduction off your labour; VAT is a tax you add (or, under reverse charge, hand off). One can apply without the other.
- Deducting CIS off materials. The deduction is labour-only. Take it off the lot and you've shorted yourself.
- Assuming reverse charge means 'no VAT'. The VAT still exists and still gets shown - the customer just accounts for it instead of you. Leave the wording off and the contractor's books won't balance.
Let the quote handle the wording for you
Getting these lines right by hand every time is a faff, and that's half the reason I lean on a quoting tool. Quotato applies the right VAT band, handles CIS, and drops the reverse-charge wording onto the quote for you - so it's presented properly without retyping it on every job. It keeps the numbers tidy; you still confirm the treatment is right for that job.
None of this is as scary as it first looks once you've done a few. Get your head round the band, the CIS status and the reverse charge, and the rest is just presenting it tidy - and a customer trusts a quote they can actually understand.
Get VAT bands, CIS and reverse-charge wording right on every quote, automatically.
Try Quotato free →