Subcontractor Invoice Template - UK

If you're registered for VAT, yes—you must add VAT at the standard rate to your subcontractor invoices. However, if the client is registered under the Construction Industry Scheme (CIS) and you're a subcontractor, they may reverse-charge the VAT. This means you don't add VAT to the invoice, but you can still reclaim VAT on your business expenses. If you're not VAT-registered, you cannot charge VAT and should clarify this on your invoice. Always confirm your VAT status and the client's CIS registration before submitting.

The Construction Industry Scheme (CIS) is an HMRC tax regime for construction work where clients deduct a percentage (typically 20%) from subcontractor payments before settlement. As a CIS-registered subcontractor, you should expect clients to apply this deduction unless you hold a CIS exemption certificate. Your invoice should reflect the gross amount due, and the client will separately show the CIS deduction on their records. Non-construction subcontractors aren't affected. Understanding CIS is essential for UK construction invoicing, as it impacts your cash flow and tax filings.

Your UK subcontractor invoice must include your business name and address, the invoice date, a unique invoice number, your VAT registration number (if registered), the client's business name and address, a clear description of work completed, hourly rates or fixed amounts, quantities if applicable, and the invoice total. If VAT applies, show it separately. For CIS subcontractors, include your unique taxpayer reference (UTR). The invoice should be sufficiently detailed that the client can match it to their records and HMRC can verify the work occurred. Incomplete invoices may be rejected for payment or scrutinised during tax audits.

Retention (or holdback) is standard in construction contracts—clients withhold a percentage, typically 5–10%, until project completion or final approval. This protects the client if work is defective or incomplete. You should invoice the full amount due, but expect the client to pay 90–95% immediately and release the retained amount later, usually 30–60 days after final completion or remedial work approval. The retention terms should be agreed in writing before work begins. Always clarify retention percentages and release dates with the client upfront to avoid payment surprises and cash flow strain.

Both models require professional invoicing, but they differ in structure and tax treatment. As a sole trader, your business name and personal address appear on invoices alongside your tax reference number. A limited company invoices under its registered company name and number with the company address. Limited companies often appear more established to clients and may offer tax efficiency for higher earners, but they involve more paperwork and accounting costs. Sole traders enjoy simpler administration. Consult an accountant about which structure suits your income level and client expectations. Invoicing requirements are strict for both, and HMRC scrutinises discrepancies closely.

Common UK subcontracting terms are "net 14" (payment within 14 days) or "net 30" (within 30 days), though some clients demand 60+ days. Negotiate terms before starting work, not after invoicing. Construction clients often have their own payment schedules tied to project milestones or client funding, so align your terms accordingly. Be clear on your invoice: state payment terms, invoice due date, and your payment method (bank transfer preferred). Late payment can strain cash flow, so consider offering a small discount for early payment or charging interest on overdue invoices under the Late Payment of Commercial Debts (Interest) Act 1998.

Invoice numbers must be unique and sequential—HMRC requires you to number invoices consecutively without gaps, which prevents fraud and aids compliance checks. A common format is the year and sequence (e.g., 2025-001, 2025-002) or a simple running number (001, 002, 003). Avoid starting over annually if possible, as HMRC prefers one continuous sequence. Never reuse, skip, or manually alter invoice numbers. Digital invoicing systems automatically prevent numbering errors. Keep detailed records of all issued invoices, including duplicates or cancelled ones—HMRC expects a complete audit trail. Proper numbering demonstrates professionalism and protects you during tax inspections.

A subcontractor invoice is issued by a self-employed professional or company providing services to another business (not direct consumers), whereas a standard invoice can be issued to anyone. Subcontractor invoices typically include CIS considerations if construction-related, often have negotiated payment terms, and may include retention clauses. Subcontractors also provide more detailed service descriptions for tax purposes and client accountability. The legal content is similar, but subcontractor invoices reflect the unique relationship between professional service providers and their clients, including industry-specific deductions, holdbacks, and regulatory compliance like CIS. Understanding this distinction ensures you invoice appropriately for your business model.