CIS for roofers explained: deductions, returns and the VAT reverse charge

Note: this is a general guide, not tax advice. Rules and rates change – always check the latest guidance on GOV.UK or with your accountant.

What is CIS?

The Construction Industry Scheme is HMRC’s system for collecting tax from subcontractors in construction. Contractors deduct money from payments to subcontractors and pass it to HMRC as advance payments towards the subcontractor’s tax and National Insurance.

Contractor or subcontractor – which are you?

• Subcontractor: you do roofing work for another construction business. You should register for CIS, otherwise deductions are made at a higher rate.
• Contractor: you pay subcontractors for construction work. You must register as a contractor, verify each subcontractor with HMRC and make deductions.
• Many roofing companies are both.

The deduction rates

• 20% for subcontractors registered for CIS.
• 30% for subcontractors who are not registered.
• 0% for subcontractors with gross payment status.

The deduction is made from the labour part of the payment only – not materials, and not VAT. That is why invoices should show labour and materials separately.

Monthly returns

Contractors file a CIS return every tax month (the 6th of one month to the 5th of the next). The return is due by the 19th after the end of the tax month, and the deductions are paid to HMRC by the 22nd if paying electronically. Late returns attract penalties, even if you had nothing to pay. Give each subcontractor a payment and deduction statement.

The VAT domestic reverse charge (since March 2021)

Since 1 March 2021, many building and construction services between VAT-registered businesses fall under the domestic reverse charge. When it applies, the supplier does not charge VAT on the invoice; instead the customer accounts for it on their own VAT return. The invoice must say that the reverse charge applies.

It does not apply to supplies to end users – for example homeowners, or a business that is having its own premises re-roofed and is not supplying construction services onward. For those customers you charge VAT as normal.

Retentions

On commercial work, main contractors often hold back a retention – commonly a few percent of each payment – until completion and the end of the defects period. Track every retention and its release date, or it is easy to forget money you are owed.

Keep it organised per job

CIS, reverse charge VAT and retentions all depend on the job and the customer. Recording them per job – as they happen – makes month-end simple. Profit Engine tracks CIS, VAT and retentions per job and shows them on your cash flow forecast, so your accountant gets clean figures and you are never surprised by a tax bill.

Frequently asked questions

Is roofing covered by CIS?

Yes. Roofing is construction work under CIS, so payments between contractors and subcontractors for roofing work are generally within the scheme.

Do CIS deductions apply to materials?

No. Deductions are made from the labour part of a payment. The subcontractor’s invoice should show materials separately.

Does the reverse charge apply when I work for homeowners?

No. The domestic reverse charge applies between VAT-registered businesses in the construction supply chain. Homeowners and other end users are charged VAT in the normal way.