Free tool · Construction

CIS deduction & VAT reverse charge checker

Enter an invoice and this tells you how much CIS to deduct, whether the VAT domestic reverse charge applies, what the invoice must say, and the amount that actually changes hands. Built by an ICAEW Chartered Accountant who does this for Hampshire contractors every week.

What does this checker do?

The CIS deduction and VAT reverse charge checker from Lumi Accountancy works out, for a single construction invoice, the Construction Industry Scheme deduction (0%, 20% or 30% of the labour element, never the materials), whether the VAT domestic reverse charge applies to the supply, the wording HMRC expects on the invoice, and the net amount the contractor pays the subcontractor. It reflects the rules as at September 2026. It's a guide, not advice: if your job has retentions, mixed supplies or an end-user question, talk to Chris.

The invoice

The subcontractor's direct cost of materials, plant hire and fuel for plant. Not marked-up materials.
Subcontractor's CIS status (as verified with HMRC)

The VAT position

VAT rate for this work
An end user is a business that won't sell the construction work on — a landlord, a shop owner, a developer building for themselves. If they haven't said so in writing, treat them as not an end user.
Assumptions and rates used

CIS deductions of 20% (registered), 30% (unregistered) and 0% (gross) apply to the labour element only, after taking off the direct cost of materials and any VAT. The domestic reverse charge applies to standard- and reduced-rated construction services within the scope of CIS, supplied between VAT-registered businesses where the customer is CIS registered and has not confirmed end-user status. Rules as at September 2026 — HMRC's technical guide.

How it works

The two rules this checker applies

CIS deductions

A contractor paying a subcontractor for construction work must verify them with HMRC and deduct 20% (registered), 30% (not registered) or nothing (gross payment status) from the labour part of the payment. The direct cost of materials, plant hire and fuel for plant is left out of the calculation, and so is VAT. The deduction is paid to HMRC on the monthly CIS return and counts as tax already paid by the subcontractor.

VAT domestic reverse charge

Since 1 March 2021, when a VAT-registered subcontractor supplies standard- or reduced-rated construction services to a VAT-registered, CIS-registered customer who is not an end user, the subcontractor does not charge VAT. The customer accounts for it on their own VAT return instead. The invoice must still show the VAT rate or amount and state that the reverse charge applies. Zero-rated work, supplies to end users who've confirmed in writing, and supplies to unregistered customers are charged normally.

Common questions

Questions contractors ask about CIS and the reverse charge

No. CIS is deducted from the labour element only. The subcontractor's direct cost of materials, plant hire and fuel for plant is excluded, but only the actual cost, so ask for evidence if the materials figure looks generous. VAT is also excluded from the calculation.
No. The reverse charge only applies between two VAT-registered businesses where the customer is also registered for CIS. If the customer isn't VAT registered — a private homeowner, for example — you charge VAT in the normal way.
The invoice must make clear that the reverse charge applies and that the customer must account for the VAT. HMRC accepts wording such as "Reverse charge: VAT Act 1994 Section 55A applies" or "Reverse charge: customer to pay the VAT to HMRC". It should also show the VAT rate or the amount of VAT the customer needs to account for, even though that VAT isn't added to the total.
If any part of a supply is within the reverse charge, the whole supply is normally reverse-charged, materials included. There's a 5% disregard: where the reverse charge element is 5% or less of the total, you can treat the whole invoice under normal VAT rules. Mixed invoices are exactly the kind of thing worth checking with an accountant before they go out.

Last reviewed September 2026. This tool is general guidance for construction businesses in England and Wales and doesn't replace advice on your own contracts.

Sick of working this out every month?

Lumi's construction packages include CIS verification and monthly returns, reverse charge VAT, retentions and job costing in Xero, with a chartered accountant on the end of the phone. Fixed fee, in writing, before you commit.

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