If you run a business or carry out freelance work, you’ll be used to issuing invoices. But as a subcontractor working in construction, you'll need to make a couple of adjustments to standard invoice templates if you want to get paid correctly.
In this article, we explain how to add CIS deductions to an invoice template, how to handle CIS and tax, and how you can use Debitoor to create CIS-compliant invoices.
Basic information on a CIS subcontractor invoice template
Invoice templates for CIS subcontractors are pretty similar to standard invoice templates, which means that – at a minimum – they need to include the following information:
- A unique invoice number
- An invoice date (the date your invoice is issued)
- A due date (the date the invoice is due)
- Your contact details
- Your contractor’s contact details
- A brief description of the services provided (including a name, quantity, and price per unit)
- Subtotal (the amount due before taxes and deductions)
- Total (the amount due after taxes and deductions)
Without this information, your invoice won’t be considered an official, legally binding document, so double-check that every invoice you issue uses a complete template with all of the necessary details.
Extra details – such as a company logo, payment terms, and bank details – are optional, but adding this information ensures easy communication and can help you get paid quicker.
Adding deductions to your CIS subcontractor invoice template
The only real difference between invoice templates used by CIS subcontractors and invoice templates used by other types of freelancers is that CIS invoice templates need to include CIS deductions.
There are three rates of CIS deduction – 20% for registered subcontractors, 30% for unregistered subcontractors, and 0% for subcontractors with ‘gross payment status’. If you qualify for gross payment status, the contractor you work for doesn’t need to make deductions from your pay, so it isn't necessary to add information about CIS to your invoices.
However, if you use either the 20 or 30% rate, you need to make sure that your invoice templates include:
- The CIS deduction rate
- The total amount that is eligible for CIS deductions (i.e. the cost of labour)
- The total amount to be deducted
Subcontractor invoice templates with both CIS and VAT
If you’re a CIS subcontractor registered for VAT, you’ll need to add both CIS deductions and sales tax to your invoices. But this can get a bit confusing.
CIS is calculated based on the net price of labour, which means that CIS deductions should be calculated based on the amount you charge for labour without VAT. On the other hand, VAT is not affected by CIS and applies to both labour and supplies; you should therefore calculate VAT using the total price of materials and labour before CIS deductions.
Using the example of the invoice above, you complete a job and issue an invoice that includes both labour fees and material costs. Before VAT, you charge £800 for labour and £1,200 for materials. The subtotal before VAT is therefore £2,000.
VAT is charged at the standard rate of 20% and is applicable to both labour and materials. 20% of 2,000 is 400, so you add £400 to the subtotal before VAT. CIS is only applicable to the labour fee before tax; as you are registered for CIS, deductions are taken at 20%. 20% of 800 is 160, so you deduct £160 from the total amount after VAT. Your customer must pay a total of £2,240.
It's up to you whether you want to use gross or net pricing, but either way, it is important to clearly indicate the amount of VAT due, the amount of CIS deducted, and the total amount that your customer needs to pay.
Invoice templates for CIS subcontractors with Debitoor
The easiest way to create an accurate invoice is to use online invoicing software like Debitoor. With invoicing software with automatic invoice templates, all you need to do is fill in a few details and click send – you don’t need to worry about formatting your invoice or leaving out crucial information.
And because Debitoor is set up for CIS, its takes just a few seconds to add CIS deductions to your invoice templates. To find out how, check out our blog post ‘In construction? Debitoor is for you!’.