How to Write a CIS Invoice: What Must Be on It and What Happens If You Get It Wrong

A CIS invoice must separate labour from materials — or your contractor will deduct 20% from your material costs, money you won't see until your Self Assessment. This guide covers every required field, includes a worked invoice example, explains how VAT interacts with CIS, and shows what happens when common mistakes are made.

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CIS Tax · 9 min read ·

How to Write a CIS Invoice: What Must Be on It and What Happens If You Get It Wrong
How to Write a CIS Invoice: What Must Be on It and What Happens If You Get It Wrong

QuoteDone · CIS Tax Guides

How to Write a CIS Invoice: What Must Be on It and What Happens If You Get It Wrong

Published by QuoteDone Editorial Team  ·  Aligned to HMRC CIS340 and 2026/27 Guidelines

A CIS invoice is not the same as a standard invoice. If you don't separate labour from materials, your contractor will deduct 20% from your material costs — money you'll have to wait until your Self Assessment to get back. Here's exactly what to include, with a worked example.

20% Deducted from labour only — not materials
14 fields Required on a compliant CIS invoice
£0 Cost of our free CIS Invoice Generator

Every time you complete a job under CIS, you raise an invoice. And every time you raise that invoice, there's a number that determines how much money you actually get paid — the amount your contractor deducts before they transfer anything to your account.

That number is calculated from your invoice. Specifically, from how clearly you've separated your labour charge from your material costs. Get it right, and the contractor deducts 20% from labour only. Get it wrong — or don't separate them at all — and they may deduct 20% from everything.

On a £1,500 invoice with £500 in materials, that's a £100 difference in what gets deducted. Across a year of regular work, that adds up to a significant amount of money sitting with HMRC that you'll need to claim back through Self Assessment — money you could have received at the time.

"CIS deductions only apply to labour — never to materials. The only way to protect your materials from deduction is to show them separately on every invoice."

— QuoteDone CIS Tax Guides, aligned to HMRC CIS340

What Must Be on a CIS Invoice

🧾 Want to skip straight to the invoice? Use our free CIS Invoice Generator — creates a compliant invoice with correct labour/materials split in 60 seconds.

A CIS invoice needs more information than a standard invoice. The contractor needs it to process the deduction correctly, and HMRC needs it to match the payment to your records. Here's everything that must be included:

  • ✓
    Your name or business name The name you are registered under with HMRC — must match your CIS registration exactly.
  • ✓
    Your UTR (Unique Taxpayer Reference) Your 10-digit HMRC tax reference number. The contractor needs this to verify you before payment.
  • ✓
    Your National Insurance number Required for sole traders. Limited companies use their company registration number instead.
  • ✓
    Contractor's name and address The full legal name and registered address of the contractor you are invoicing.
  • ✓
    Unique invoice number A sequential reference number for your records. Never repeat an invoice number.
  • ✓
    Invoice date The date you are raising the invoice. This is the tax point for VAT purposes.
  • ✓
    Description of work What construction work was carried out, including the site address or location where relevant.
  • ✓
    Labour cost — listed separately The charge for your work. This is the only figure CIS deduction applies to. It must be shown as a separate line from materials.
  • ✓
    Materials cost — listed separately Materials you supplied. CIS deduction does not apply to this figure. Must be your actual cost — not including mark-up or profit margin above direct cost.
  • ✓
    Gross amount (before CIS deduction) Labour + materials combined. The total before any deduction is applied.
  • ✓
    CIS deduction amount 20% of labour only (for registered subcontractors). Some subcontractors include this calculation on the invoice; others leave it to the contractor. Including it avoids disputes.
  • ✓
    Net payment due The amount the contractor will transfer to you after deducting CIS (gross minus deduction).
💡 If You're VAT-Registered, Also Include: Your VAT registration number, the VAT rate applied, and the VAT amount as a separate line. VAT is charged on the gross amount before CIS deduction and is paid in full by the contractor (they do not deduct CIS from VAT).

A Worked Example — CIS Invoice Done Correctly

Here's what a properly structured CIS invoice looks like for a registered subcontractor at the 20% rate, not VAT-registered:

⚠️ This Example: Non-VAT Registered Subcontractor The invoice below does not include VAT. If you are VAT-registered, you must also add your VAT number, the VAT rate, and the VAT amount as a separate line. See the VAT + CIS section further down for a worked example with VAT included.
INVOICE
J. Smith Plastering 12 Station Road, Manchester M1 1AB
UTR: 12345 67890  |  NI: AB 12 34 56 C
CIS Registered — Standard Rate (20%)
Invoice No: INV-2026-047
Date: 14 August 2026
To: ABC Construction Ltd
Site: 14 Oak Avenue, Salford
Description Amount
Labour — plastering, skimming and finishing (3 days) £900.00
Materials — plaster, bonding coat, PVA (receipts available) £350.00
Gross Amount £1,250.00
CIS Deduction (20% of labour £900.00 only) −£180.00
Net Payment Due £1,070.00

CIS deduction of £180 to be paid by contractor directly to HMRC. Please issue CIS payment and deduction statement upon payment.

✅ Key Point in This Example The £350 materials cost is paid in full — no CIS deduction applied. The contractor pays J. Smith £1,070 and sends £180 to HMRC. Without the labour/materials split on the invoice, the contractor might have deducted 20% of the full £1,250 = £250 — costing the subcontractor an extra £70 this job alone.
🧾 Create this invoice in 60 seconds — free. Use our free CIS Invoice Generator → It separates labour and materials automatically and calculates the correct deduction.

✓ No registration required  ·  100% Free  ·  HMRC 2026/27 Aligned

The Materials Rule — What Counts and What Doesn't

HMRC's CIS340 guide is specific about what can be excluded from CIS deduction as "materials." The rule is straightforward but often misapplied:

What Counts as Materials (Excluded from CIS Deduction)

Building materials used in the job ✓ Excluded from deduction
Plant hire costs (e.g. scaffold, access equipment) ✓ Excluded from deduction
Fuel for plant and equipment ✓ Excluded from deduction
Prefabricated components ✓ Excluded from deduction
Mark-up or profit above actual material cost ✗ Not excluded — deduction applies
Your own travel and subsistence ✗ Not excluded — deduction applies
Your tools (own equipment) ✗ Not excluded — deduction applies
⚠️ Materials at Cost — Not Marked Up HMRC requires that the materials figure on your invoice represents the actual direct cost you paid — not a marked-up version. If you bought materials for £400 and invoice them at £600, HMRC may challenge the £200 excess and treat it as additional labour income subject to CIS deduction. Keep receipts for all materials so you can justify the figures if asked.

How VAT Interacts with CIS

If you're VAT-registered, the interaction between VAT and CIS adds another layer — but the principle is consistent: VAT is charged on the gross amount, and CIS deduction applies to labour only.

VAT + CIS — How the Numbers Work

Labour charge £1,000
Materials cost £500
Gross (before VAT and CIS) £1,500
VAT at 20% £300
CIS deduction (20% of labour £1,000 only) −£200
Contractor pays you (£1,500 − £200 + £300) £1,600
Contractor sends to HMRC (CIS only) £200
⚠️ VAT Domestic Reverse Charge If you and your contractor are both VAT-registered and the work is within the scope of CIS, the VAT Domestic Reverse Charge may apply instead of standard VAT. In that case, you do not charge VAT on the invoice — the contractor accounts for VAT directly to HMRC. Your invoice must state "Reverse charge applies" where the VAT amount would normally appear. Check our separate guide on this topic if you're affected.
📖 VAT Domestic Reverse Charge: CIS and VAT: The Domestic Reverse Charge Explained.

What Happens If Your Invoice Is Wrong

Invoicing errors under CIS cause three types of problems:

Common CIS Invoice Errors and Their Consequences

No labour/materials split Contractor may deduct CIS from full amount including materials
Wrong UTR on invoice Contractor can't verify you — 30% deduction applies
Materials marked up above actual cost HMRC may reclassify excess as labour — deduction applies
Missing description of work Deduction statement may not match your records
Duplicate invoice numbers HMRC compliance red flag during enquiry

All of these errors can be corrected — but most of them can only be corrected at Self Assessment time, which means waiting months. Getting the invoice right from the start means you receive the correct amount immediately, without having to chase corrections or wait for refunds.

CIS Invoice Checklist — Before You Send

  • Your name/business name exactly as registered with HMRC
  • Your UTR (10-digit number)
  • Your NI number (sole trader) or company registration number (Ltd)
  • Contractor's full legal name and address
  • Unique sequential invoice number
  • Invoice date
  • Clear description of work and site address
  • Labour charge as a separate line
  • Materials cost as a separate line (at actual cost, with receipts)
  • Gross amount (labour + materials)
  • CIS deduction amount (20% of labour only)
  • Net payment due
  • If VAT-registered: VAT number, rate, and amount — or "Reverse charge applies"
  • Request for CIS payment and deduction statement upon payment
📄 What to do when you receive your deduction statement: CIS Payment and Deduction Statement Explained — how to check it, what to keep, and how it feeds into your Self Assessment.

Frequently Asked Questions

Can I add a profit margin to materials on my CIS invoice?

HMRC requires that the materials figure represents your actual direct cost — not a marked-up version. You can charge more for materials in practice, but HMRC may reclassify any amount above the verified direct cost as labour income subject to CIS deduction. Keep your material receipts and invoice materials at cost to avoid complications.

What if my contractor refuses to give me a CIS deduction statement?

Contractors are legally required to issue CIS payment and deduction statements. If they refuse, contact HMRC's CIS helpline on 0300 200 3210. HMRC can check what the contractor reported on their monthly CIS return and may be able to reconstruct your records from their submissions.

Do I need to include the CIS deduction calculation on my invoice?

It's not strictly required — but it's strongly recommended. Including the CIS deduction calculation on your invoice confirms the expected net payment, reduces disputes, and makes it easier to check that the contractor's deduction statement matches what you invoiced.

What if I have gross payment status — does the invoice look different?

If you have gross payment status (0% CIS deduction), your invoice still separates labour and materials — but there is no CIS deduction line. The contractor pays the full gross amount. Your invoice should confirm your GPS status so the contractor knows not to deduct. You still declare the full income on your Self Assessment.

People Also Ask

What must be on a CIS invoice?

A CIS invoice must include your name, UTR, National Insurance number (sole traders), the contractor's details, a unique invoice number and date, a description of the work, labour cost separately from materials cost, the gross amount, the CIS deduction (20% of labour only), and the net payment due. If VAT-registered, include your VAT number and VAT amount.

Does CIS apply to materials on an invoice?

No. CIS deductions apply only to the labour portion. Materials, plant hire, and fuel for plant are excluded from the CIS calculation. This is why separating labour and materials on every invoice is essential — without the split, the contractor may deduct CIS from the full amount.

What is a CIS invoice template?

A CIS invoice template is a pre-formatted invoice that includes all the required fields for the Construction Industry Scheme — with separate lines for labour and materials, a CIS deduction calculation, and space for your UTR. Our free CIS Invoice Generator at quotedone.uk/cis-invoice creates a compliant invoice in 60 seconds.

How do I calculate the CIS deduction on my invoice?

Multiply your labour charge by your deduction rate: 20% for registered subcontractors, 30% for unregistered. For example: £900 labour × 20% = £180 CIS deduction. The contractor pays you £900 - £180 = £720 for labour, plus the full materials cost, plus VAT if applicable. The £180 goes to HMRC and is credited against your tax bill.

QuoteDone Tools

Create a Compliant CIS Invoice in 60 Seconds.

Our free CIS Invoice Generator separates labour and materials automatically, calculates the correct deduction, and produces a ready-to-send invoice.

Free Invoice Generator Need professional invoices fast? Create clean, compliant CIS invoices in seconds — free, no sign-up. CREATE YOUR INVOICE NOW →
CIS Refund Calculator Ready to claim your CIS refund? Use our free calculator to find out what HMRC owes you. CHECK YOUR REFUND →

This article is for informational purposes only and does not constitute formal accounting, tax, or legal advice. CIS invoicing requirements are governed by HMRC CIS340 guidance which may be updated. Always check the latest guidance on gov.uk or consult a qualified accountant. Aligned to 2026/27 HMRC guidance.