Construction Invoice Calculator

The Construction Industry Scheme (CIS) requires contractors to deduct money from subcontractor payments and pass it to HMRC. The standard deduction is 20% for registered subcontractors and 30% for unregistered ones. CIS applies to labour costs only, not materials.

Most construction work is charged at the standard 20% VAT rate. Some work qualifies for the reduced 5% rate (e.g. renovating empty dwellings, converting commercial to residential) and new-build residential is zero-rated (0%). Importantly, since 1 March 2021 the VAT domestic reverse charge applies to most building and construction services supplied between VAT-registered businesses: a CIS-registered subcontractor invoicing a contractor who is not the end user charges no VAT, and the customer accounts for it to HMRC instead. Select the reverse-charge option in that case. Always check with your accountant for the correct treatment.

The VAT domestic reverse charge for construction (in force since 1 March 2021) applies where the supply is a specified construction service reported under CIS, both parties are VAT-registered, and the customer is not the end user (i.e. they make an onward supply of the construction services). The subcontractor charges no VAT and the customer accounts for it on their own return; your invoice must state that the reverse charge applies. This is different from zero-rating (0%), which is a substantive VAT rate for things like new-build dwellings where genuinely no VAT is due by anyone. It does not apply to supplies to private domestic customers or to a declared end user. Source: gov.uk, "Check when you must use the VAT domestic reverse charge for building and construction services".

Retention is a percentage (typically 3-5%) withheld from each payment as security against defects. Half is usually released at practical completion and the remainder after the defects liability period (typically 12 months). It is calculated on the net value before VAT.

Payment terms are usually set by the contract; many commercial contracts use 30, 60 or 90 days. Where a contract is silent or non-compliant, the Scheme for Construction Contracts (the statutory fallback under the Housing Grants, Construction and Regeneration Act 1996) applies: interim payments become due 7 days after the end of the relevant period (or on the payee’s application, whichever is later) and the final payment becomes due 30 days after completion. In both cases the final date for payment is 17 days after the due date. The Construction Act also gives you the right to suspend performance for non-payment after giving the required notice. Source: Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998/649), Sch Part II, paras 4, 5 and 8.

Preliminary costs (prelims) cover site setup, management, welfare facilities, temporary services, plant, scaffolding, skips, site security, and insurance. They typically represent 8-15% of the contract value and are usually invoiced proportionally across interim valuations.