CIS invoice templates ensure that construction workers comply with the Construction Industry Scheme tax requirements in their invoicing. This article tackles all about CIS invoice templates, particularly the most commonly used ones in the UK construction industry, when they should be used, what to fill out, the best practices when making an invoice, and most importantly, what not to do whilst filling the CIS invoice template.
What is CIS Invoice Template and When Should It Be Used?
Construction workers will have to invoice their contractors or employers for the work done. As they are under CIS and VAT regulations, they will have to use any CIS invoice templates that best suit their specific situations, which are pre-designed to make their invoicing obligations more efficient, consistent, and accurate.
Due to the domestic reverse charge implemented on 1 March 2021 which applies to most construction services, the supplier no longer pays for the VAT but the buyer. It is not the contractors’ responsibility to pay any VAT to registered subcontractors. If the latter includes VAT, their contractor will ask them to reissue their invoices without it.
When a transaction qualifies for the domestic reverse charge, it’s crucial to clearly label it as such on the invoice and implement a 0% VAT rate.
The question often arises: should one issue a VAT invoice or a non-VAT one? Well, that depends.
If your business participates in the Construction Industry Scheme, you must produce a CIS invoice. It is a tailored version of a standard VAT invoice, alternatively referred to as a domestic reverse charge invoice.
The United Kingdom has a comprehensive set of guidelines that pertain to sales within the construction industry. This discussion will focus on whether it’s necessary for you to sign up for the Construction Industry Scheme (CIS) or whether you should implement the domestic reverse charge mechanism on your billing statements.
There are six types of CIS invoice templates commonly used by construction workers according to the need:
Standard invoice structures don’t apply to individuals registered under CIS, as they have CIS tax deductions and/or VAT to account for. Standard invoices apply to businesses not registered under the construction industry and/or VAT schemes. Businesses not required to register for VAT for having an annual turnover less than £85,000 can use standard non-VAT invoices. They can register for VAT nevertheless to get the benefits, using standard VAT invoices.
Should your enterprise lack registration under the Construction Industry Scheme (CIS) yet holds VAT registration, it becomes imperative for you to provide your clientele with VAT invoices.
A distinct process is required when your building-related services are not covered under the Construction Industry Scheme (CIS) or the domestic reverse charge process (for instance, if you’re an architect).
When dealing with VAT invoices, there is a more incredible amount of detail required as compared to standard invoices. This detail includes your VAT registration number and a comprehensive summary of the VAT amount that’s been applied.
This is used for large and complex projects issued before the work is done or the goods are delivered, outlining the proposed work, expected costs, and payment terms. Since this is issued before the work is finalised, this only serves as cost confirmation, not a payment request, so that the clients can arrange the finances needed for any purchase. A pro-forma invoice is a crucial part of the procurement process as it provides more accurate and detailed expenditure information than just a quote.
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Time and Materials Invoice
This invoice is used when a company charges its customers based on the time and materials used to complete a project or provide a service. In this invoice, construction workers include not only the cost of the materials needed but also their hourly wage and other fees relevant to the services they provide.
Milestone invoice is used in large-value, long-term projects where payment is made according to the completion of specific project stages, called “milestones,” which serve as the basis for the progress made at work. Subcontractors use this invoice when they bill their clients incrementally as their work progresses.
This is similar to a milestone invoice in that the project is ongoing and for the long term, and payment is made based on the progress of the work. However, there is no clear division of milestones. Progress invoice allows subcontractors to be “paid as they go” as they break their project into smaller pieces based on the work they completed, which they will periodically invoice.
A final invoice is used when a project has been completed or a contract has ended; that is when the project, goods, or services have all been delivere.
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What Should Be Included in a Construction Invoice?
When companies have finished construction work for clients and are prepared to receive payment, they use a construction invoice.
Creating professional Construction invoices can often be challenging, particularly for small business owners with numerous responsibilities to manage.
Using a blank construction invoice allows you the flexibility to specify the particular tasks for which you need to bill. It could be anything from building materials and labour costs to various engineering activities. Feel empowered to adjust it according to your
Generally, subcontractors should include the following details regardless of their chosen CIS invoice template:
Contractor and subcontractor details
This includes the subcontractor’s company, the invoice number, and the date the invoice was created. The contractor’s information should include the name and address of who is being invoiced and any project or job reference numbers.
Here’s how to generate a subcontractor invoice Template:
Begin by crafting detailed and professional invoices for your subcontracted tasks. It’s pretty simple with the free subcontractor invoice template from FreshBooks.
You only need to download the template, personalize it, and then send it off. If you need clarification on the information to include in your invoice, don’t worry. We have outlined below the specific details that need to be added to your invoices, ensuring you get paid correctly every time. Start by downloading FreshBooks’s free subcontractor invoice template and filling in your details.
Whether you’re working in the US, UK, or any other part of the world, having an invoice method that suits your needs is essential.
Particularly if you’re a subcontractor, you can swiftly generate professional invoices using the subcontractor invoice template provided by FreshBooks.
Thankfully, with FreshBooks’s free subcontractor invoice template, billing for subcontracted work has become simpler than ever.
This section provides a detailed overview of the project and the timeline for every step, which will depend according to the CIS invoice subcontractors use.
Description of work done, or products supplied
This should provide a detailed description of the work that has been completed, including the labour and materials used, the unit price, and the total cost.
Quantity, rate, and amount
This consists of the total quantity of material or services provided, the unit rate, and the amount due for each transaction.
VAT and CIS deductions
This section consists of VAT deductions, including VAT for each unit and their total. However, VAT will have to be listed separately, as the invoiced contractor is not held responsible for repaying any VAT.
Total amount due
This is the total calculation of the work completed after all the deductions (VAT/CIS deductions) are made.
This should include contact information for the service provider in case the customer has any questions or concerns.
By specifying detailed payment instructions and a feasible remittance schedule, they can significantly expedite the process. This approach encourages clients to settle their invoices promptly, as the clarity and precision of the payment information offered reduce uncertainty and delay.
How to Use a CIS Invoice Template
Subcontractors will first fill out the following details:
- Subcontractor’s name or company’s name, address, and contact number
- VAT registration number (if applicable)
- Date of the invoice and the number
- Company logo
- Name of the company being invoiced
- Contractor’s details (address and contact information)
- Work description (including where and when)
- The gross amount being charged for work done (before any deduction)
- Deductions (VAT/CIS charges)
- Net amount payable
HMRC also asks about the net amount and payment terms and conditions, such as payment deadline, late payment fees, whether they are to be paid in cash or credit, terms of credit, etc. Follow these:
- Customise a template and ensure it fulfills all the HMRC requirements, double-checking any minutiae details are not left out.
- Stay up to date with any changes to HMRC regulations or requirements.
- Keep the invoice format consistent.
- Save a copy before sending an invoice to the customer and organise them regularly.
- Review before sending the invoice to the contractor.
- Keep track of payments due and payments to be made.
Tips for Creating a Professional CIS Invoicee
CIS-compliant must include the following:
- Company logo and Business Name
- Professional font and format
- Clear and concise language
- A complete breakdown of the charge
- Consistent invoice numbering system
- Updated with HMRC rules and regulations
Aside from delays, errors in CIS invoice submissions may subject subcontractors to penalties. Here are some of the most common mistakes they should avoid:
- Not including the correct CIS registration number;
- Failing to include a detailed description of the work;
- Failing to include the correct amount of tax;
- Failing to include the correct invoice number and date;
- Failing to include payment terms;
- Not reconciling invoices with payments;
- Submitting invoices late.
Whilst CIS invoice templates include everything needed, it is easy to overlook some details, which is why it is best to double-check the document first to see if every required space is filled out completely and accurately. HMRC usually does not offer leniency to mistakes and issues CIS penalties for any error, especially for submission delays.
How Legend Financial Can Help
A standardized template can make the process easier, saving time and effort for the subcontractors whilst ensuring they make invoices accurately. Invoicing can be complex overall, nevertheless. The consequences of non-compliance can be severe, resulting in significant financial and legal consequences.
Legend Financial understands every challenging aspect there is about CIS. Our team of qualified professionals is here to help provide the perfect solution for our clients’ CIS invoicing needs. Contact us today!
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Invoice templates for construction services (n.d) retrieved from: https://help.sbc.sage.com/en-gb/accounting/cis/Create-CIS-Invoice.html
Subcontractor Invoice Template (n.d) retrieved from: https://www.freshbooks.com/en-gb/invoice-templates/sub-contractor
What you need to do as a Construction Industry Scheme (CIS) Subcontractor – Part 1 (7/1/2020) retrieved from: https://www.totalaccountingkent.co.uk/blog/post/11215/What-you-need-to-do-as-a-Construction-Industry-Scheme-CIS-Subcontractor–Part-1/
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Construction Industry Scheme (CIS) (n.d) retrieved from www.gov.uk