cis reverse charge quote
VAT, CIS and the Reverse Charge: Quoting Right for UK Trades
Right, this is the one that makes most tradespeople's eyes glaze over, so I'll keep it as plain as I can. VAT, CIS and the domestic reverse charge are three separate things that all land on the same quote, and getting them muddled is a quick way to either short yourself or land in bother with HMRC. I've made a few of these mistakes over the years so you don't have to.
Quick word before we start: this is general guidance from one sparky to another, not formal tax advice. Your own situation can have wrinkles, so do check with HMRC or your accountant where it matters. Fair enough? Good — let's get into it.
The VAT bands, plain and simple
If you're VAT-registered, every job you quote sits in one of three bands. Most domestic work you do day to day will be standard-rated, but it's worth knowing the others exist because they can genuinely save your customer money on the right job:
- Standard rate (20 per cent) — the default for most work and most materials.
- Reduced rate (5 per cent) — applies to certain qualifying work, such as some energy-saving installations and certain residential conversions and renovations.
- Zero rate (0 per cent) — applies in specific cases, such as some work on new-build dwellings.
The reduced and zero rates come with proper conditions attached, and they're easy to get wrong. If you think a job might qualify, that's exactly the moment to check the detail with your accountant rather than guessing. Charge 20 per cent 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.
Where CIS comes in
CIS — the Construction Industry Scheme — is a different beast to VAT and people muddle the two constantly. CIS is 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 important bit for quoting: CIS deductions come off the labour element only, never the materials. The standard deduction is 20 per cent for registered subcontractors (or 30 per cent if you're not registered, which is a good reason to register). So if you're subcontracting to another contractor, your labour gets the deduction but your materials are paid in full.
Mind you, CIS only applies in a contractor-to-subcontractor relationship within construction. Doing a job direct for a homeowner? CIS doesn't come into it at all — that's just a normal customer invoice.
The domestic reverse charge explained
This is the one that threw everybody when it came in. The domestic reverse charge changes who actually pays the VAT over to HMRC on certain construction services between VAT-registered businesses that fall under CIS.
Here's the plain version. Normally you charge VAT, collect it, and pay it to HMRC. Under the reverse charge, you don't collect the VAT — instead 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 — it's 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 that VAT-registered subbie-to-contractor situation.
How to show it all clearly on a quote
This is where a tidy quote earns its money. However the rules land on a particular job, your customer should be able to read the figures and understand them at a glance. For a standard VAT job, that means a clear breakdown:
- Labour and materials shown separately.
- The net (pre-VAT) total.
- The VAT rate and amount as its own line.
- The gross total to pay.
- Your VAT number.
For a reverse charge job, you still show the VAT rate that applies, but instead of adding the VAT to the total you note clearly that the reverse charge applies and that the customer must account for the VAT. A simple line such as 'Domestic reverse charge applies — customer to account for VAT to HMRC' does the job. For a CIS job, it's worth making clear that the deduction will be taken from the labour element so there are no surprises when they pay.
Getting these lines right by hand every time is a faff, and that's honestly half the reason I lean on a quoting tool — Quotato lets me set the right VAT treatment and have it presented properly without me re-typing the wording on every job. Whatever you use, the goal's the same: a quote so clear the customer never has to ring up and ask what a number means.
Get your head round which band you're in, whether CIS bites, and whether the reverse charge applies, and the rest is just presenting it tidy. None of it's as scary as it first looks once you've done a few — and your customers will trust a quote they can actually understand. Right, that's the boring-but-important stuff covered. Now go and price that job properly.