CIS and Reverse Charge VAT on Electrician Invoices

If you are a VAT-registered electrician working for a VAT-registered, CIS-registered contractor who has not told you in writing that they are an end user, you invoice with no VAT charged, note that the reverse charge applies, and the contractor deducts 20% CIS from your labour before paying you. That has been the position since 1 March 2021, and it still catches subcontractors out every month: VAT charged when it should not have been, deductions taken off materials, and 30% deductions because a trading name did not match HMRC's records. This guide walks through both schemes as they land on one invoice, with three worked examples and the wording HMRC expects.

What is CIS and which electrical work does it cover?

The Construction Industry Scheme, set out in HMRC's guide CIS 340, makes a contractor deduct money from payments to a subcontractor and pass it to HMRC as an advance towards the subcontractor's income tax and National Insurance. Contractors are construction businesses plus any other business that spends more than £3 million a year on construction. Private householders are never contractors, which is why CIS is invisible on a domestic rewire billed to the homeowner and appears the moment a builder pays you for the same job.

For electricians, CIS covers installing systems of lighting, power, heating, ventilation and similar building services, together with alterations, repairs and extensions to buildings. It does not cover installing dedicated security systems such as burglar alarms, CCTV and public address systems, and it does not cover work that is pure manufacture or delivery of materials without installation. CIS 340 Appendix A goes through the grey areas: fitting a consumer unit on a construction site is caught, whereas a standalone PAT testing visit to an occupied office is professional testing rather than construction and normally sits outside the scheme. When a job mixes the two, the whole payment is usually treated as within CIS.

How much is deducted and from what?

There are three rates. A subcontractor who is registered for CIS and can be verified by the contractor is deducted at 20%. One who is not registered, or whose details do not match what HMRC holds, is deducted at 30%. A subcontractor with gross payment status is paid in full and settles all tax through their own returns.

The deduction is not taken from the whole invoice. The contractor starts from the gross amount and removes VAT, the cost of materials you bought for the job, plant you hired, consumables, fuel other than fuel for travelling, and the cost of manufacturing or prefabricating materials. Whatever is left, which in practice is your labour, travel and any profit built into the labour line, is what the percentage applies to. If you are VAT registered, materials count at their net cost; if you are not, the VAT you paid on them is part of their cost and is excluded too. The contractor is entitled to see receipts and, if you give them none, must make a reasonable estimate of the materials, which is nearly always lower than the real figure. Always show materials as their own line with a value you can evidence.

The contractor must give you a payment and deduction statement within 14 days of the end of each tax month. Tax months end on the 5th, so the statement for work paid in September is due by 19 October. The contractor files their monthly CIS return by the 19th as well and pays the deductions to HMRC by the 22nd if paying electronically. Chase any missing statement straight away: it is your evidence when you claim the deduction back.

When does the VAT domestic reverse charge apply?

The domestic reverse charge for building and construction services took effect on 1 March 2021 under section 55A of the VAT Act 1994. It moves the job of accounting for VAT from the supplier to the customer on most CIS work between VAT-registered businesses. HMRC's supplier flowchart asks five questions:

1. Is the work within the scope of CIS?
2. Is the supply standard rated or reduced rated for VAT?
3. Is your customer VAT registered?
4. Is your customer registered for CIS?
5. Has your customer confirmed in writing that they are an end user or intermediary supplier?

Yes to the first four and no to the fifth means you apply the reverse charge. Any other combination means normal VAT rules. If you are not VAT registered yourself you never reach the question: you invoice without VAT as usual and the reverse charge does not exist for you, though CIS deductions still do.

An end user is a VAT and CIS-registered business that does not sell on the construction services it buys, typically a property owner, retailer or manufacturer having work done on its own premises. An intermediary supplier is connected to an end user, for example within the same corporate group or as landlord and tenant of the same land, and passes the services on unchanged. Either can opt out of the reverse charge by telling you in writing. HMRC's suggested wording is: "We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge." Keep that notice on file; without it, the default is to reverse charge.

Reduced-rate work is inside the scheme too. If you are wiring a residential conversion that qualifies for 5% VAT, the reverse charge still applies between registered businesses; you simply state 5% instead of 20%. Zero-rated work such as a new-build dwelling is outside the reverse charge because there is no VAT to shift.

Who gets which treatment?

Two points trip people up. First, the fact that the end customer is a householder does not make the main contractor an end user. If you are the main contractor on a kitchen refit and you bring in a VAT-registered subcontractor for the wiring, they should reverse charge you, while you charge the homeowner VAT in full. Second, materials you supply as part of a reverse charge job are reverse charged along with the labour. Splitting labour and materials onto separate invoices to keep the materials at normal VAT is exactly the kind of artificial separation HMRC's guidance rules out.

What must the invoice show?

A reverse charge invoice needs everything a normal VAT invoice needs: your VAT number, an invoice number, the tax point, the customer's name and address, a description of the work and the net value. On top of that, the VAT Regulations 1995 require a reference to the reverse charge, and HMRC's examples are "VAT Act 1994 Section 55A applies" and "Customer to pay the VAT to HMRC". A single line reading "Reverse charge: customer to pay the VAT to HMRC" satisfies both. You must also show the VAT amount the customer has to account for, or the rate if your software cannot show the amount, but that VAT is not added to the total due.

It also helps to add your UTR and, for limited companies, the company registration number, because the contractor needs them to verify you for CIS. Show materials and labour as separate lines with the materials figure matching your receipts. If you have gross payment status, say so on the invoice or in your onboarding paperwork, since a contractor who has not verified you will otherwise deduct at 30% by default. For the wider layout of a compliant invoice see Electrician Invoicing and Quoting Basics.

Worked examples

Example 1: standard reverse charge, 20% CIS

You are a VAT-registered electrician registered for CIS at 20%. A VAT and CIS-registered contractor refitting a shop asks you to rewire it and has not given you an end user notice. Your labour is £1,800 and the materials you bought cost £700 before VAT.

Your VAT return shows £2,500 in box 6 with no output VAT on the sale. The £360 appears on the contractor's payment and deduction statement and counts towards your tax. The contractor puts £500 in box 1, reclaims the same £500 in box 4 under the normal rules and includes £2,500 in box 7. Their monthly CIS return shows a payment of £2,500, materials of £700 and a deduction of £360.

Example 2: the same job for an end user

Now the customer is the shop's owner, a VAT and CIS-registered retail chain, and they have sent you the end user notice. You charge VAT normally: £2,500 plus £500 VAT makes £3,000. The CIS deduction ignores VAT and materials, so it stays at £360, and you receive £2,640. You account for the £500 output VAT on your return in the usual way.

Example 3: unverified subcontractor at 30%

A new-start electrician quotes a builder under the name "Northside Electrical" but registered with HMRC as a sole trader under their own name and has not yet registered for CIS. The builder cannot verify them and must deduct 30%. On the same £2,500 invoice the deduction is 30% of £1,800, which is £540, and the payment drops to £1,960 before the reverse charge is even considered. The extra £180 is recoverable at year end, but it is cash flow gone for up to twelve months. Registering for CIS and giving the contractor the exact registered name and UTR before the first payment avoids it.

What changes if I am not VAT registered?

The VAT registration threshold has been £90,000 of taxable turnover in any rolling twelve months since 1 April 2024. A sole trader below that is outside the reverse charge entirely: no VAT on the invoice, no note about section 55A, and the contractor reverse charges nothing. CIS carries on as normal. The one difference is in the materials line, because materials you bought count at their VAT-inclusive cost when working out the deduction base, which is slightly in your favour.

Watch the threshold closely if you subcontract, because reverse charge turnover still counts towards it. Once you register, HMRC's guidance is that a business whose sales are mainly reverse charge will usually be in a repayment position, with input VAT on materials and van costs to reclaim and little output VAT to pay. You can apply to submit monthly returns so the repayments arrive every month rather than every quarter.

Should I apply for gross payment status?

Gross payment status stops the deductions altogether. To qualify you need to have paid your tax and National Insurance on time, run your business through a bank account, and pass a turnover test: at least £30,000 of net construction turnover in the last twelve months for a sole trader, or £30,000 per partner or director, or £100,000 for the whole partnership or company. Since 6 April 2024 the compliance test also covers VAT, so late VAT returns or payments can cost you the status, and HMRC can withdraw it immediately where it suspects VAT fraud. HMRC reviews compliance every year. For a subcontractor doing £60,000 of labour a year, gross status keeps £12,000 in the business instead of waiting for it back through Self Assessment. Being on a competent person scheme is not a condition, but the same discipline that keeps your Qualified Supervisor (QS) Sign-Off Explained paperwork straight tends to keep HMRC happy too.

How do I get the deductions back?

Sole traders and partners enter the total from their payment and deduction statements on the Self Assessment return. The deductions are set against the year's income tax and Class 4 National Insurance and any excess is repaid. Limited companies do it monthly: the deductions suffered are reported on the Employer Payment Summary and offset against the company's own PAYE, National Insurance and CIS liabilities, with any balance at the end of the tax year reclaimed from HMRC. Either way, the statements are your evidence, so file them with the matching invoices. HMRC does not accept "the contractor never sent one" as a reason to allow a deduction it cannot trace, so chase statements within the 14-day window.

From 6 April 2026, sole traders with qualifying income above £50,000 in the 2024 to 2025 tax year keep digital records and send quarterly updates to HMRC under Making Tax Digital for Income Tax, with the threshold falling to £30,000 from April 2027 and £20,000 from April 2028. Qualifying income is your gross turnover before expenses, so CIS deductions do not bring you below the line. A subcontractor invoicing £52,000 a year is in scope now even though they only ever see about £42,000 of it land in the bank.

Watch out for

• The 5% disregard: if the reverse charge element is 5% or less of a mixed supply, both parties can agree from the start of the contract to apply normal VAT rules to the whole thing. It does not apply where the main element is zero rated, and it is judged on the overall contract, not invoice by invoice.
• Status changes mid-contract: if a customer becomes an end user, or registers for VAT part way through, they must tell you and the treatment changes from that point. Do not reissue earlier invoices.
• Retentions: the reverse charge applies to retention payments released after 1 March 2021 even where the original contract predates it.
• Deposits and stage payments: the tax point for each payment decides the treatment, so a job quoted before the customer's CIS registration but paid after it is reverse charged.
• Self-billing: if the contractor raises the invoice on your behalf, check it carries the reverse charge note and that the materials figure matches your receipts, because you are still liable for errors on your own supplies.

How Certio helps

Certio produces the EICR, EIC, Minor Works certificate and PAT records on the BS 7671 model forms and turns them into branded PDFs. Photograph the consumer unit and the circuit schedule drafts itself; point the phone camera at a Megger MFT-X1 and the reading goes straight into the schedule of test results, or dictate it while your hands stay on the probes. Suggested observation wording with the regulation reference is there for you to check and confirm. The judgement stays yours; the typing goes. Starter is free for 7 days, then £4.99 a month.

Sources

• HMRC, Construction Industry Scheme guide for contractors and subcontractors (CIS 340), including Appendix A on the scope of construction operations.
• GOV.UK, "VAT domestic reverse charge technical guide" and VAT Notice 735, for the five conditions, end user notification wording and invoice requirements.
• GOV.UK, "What you must do as a Construction Industry Scheme subcontractor", for deduction rates, gross payment status tests and the 14-day statement rule.
• GOV.UK, "Find out if and when you need to use Making Tax Digital for Income Tax", for the April 2026, 2027 and 2028 thresholds.
• Finance Act 2024, section 34, adding VAT compliance to the gross payment status test from 6 April 2024.

Related reading: How to Price an EICR: A Method for Electricians, Electrical Certificate Retention and GDPR for Electricians, Temporary Supplies on Construction Sites: Section 704 Explained and EICR for Commercial Premises: Intervals, Duties and Defects.

Written by the Certio team. Last checked 27 September 2026.