If your cleaning company does builders cleans for construction firms, some of your invoices may need the VAT domestic reverse charge, and some contractors will take a CIS deduction off what they pay you. ProCleanerUK handles both for you, on every invoice for the customers they apply to.
The domestic reverse charge has applied to building and construction services since 1 March 2021. Instead of you charging VAT and paying it over to HMRC, your customer accounts for the VAT on their own VAT return. HMRC brought it in to stop subcontractors collecting VAT and then disappearing without paying it.
Most cleaning work has nothing to do with it. But cleaning the inside of a building during construction work is one of the services it covers, so cleaners who work for builders and contractors can be caught by it.
When it applies to cleaning work
The reverse charge applies when all of these are true:
- You’re VAT registered, and so is your customer.
- The work is a construction service reported under the Construction Industry Scheme (CIS). For cleaners, that usually means cleaning the inside of a building in the course of its construction, alteration, repair, extension or restoration, such as a builders clean or a sparkle clean before handover.
- The work would normally carry VAT at the standard or reduced rate. Zero-rated work isn’t affected.
- Your customer isn’t an end user or an intermediary supplier.
That last point matters. An end user is the business the building work is ultimately for, such as the property owner, rather than a contractor passing the work on. End users get a normal VAT invoice, but they have to tell you in writing that they’re an end user. If a VAT and CIS registered contractor doesn’t tell you, the reverse charge applies.
Your regular office, domestic and commercial cleaning stays exactly as it is. If you’re not sure whether a customer or a job counts, check with your accountant before switching it on.
What a reverse charge invoice needs to show
You still send a proper VAT invoice, but it has to make clear that the reverse charge applies and that the customer pays the VAT. HMRC gives example wording such as “Customer to pay the VAT to HMRC” or “S55A VATA 94 applies”. The invoice should also show how much VAT the customer has to account for.
The total the customer pays you leaves the VAT out. On your own VAT return, you only include the net value of the sale, not the VAT itself.
Getting this wrong by hand is easy, especially if only some of your customers need it. That’s why ProCleanerUK does it for you.
CIS deductions: the other half of construction invoicing
The reverse charge deals with VAT. The CIS deduction is separate, and it’s about tax on what you earn. When a contractor pays you for construction work under CIS, they take a percentage off the payment and pay it to HMRC for you. It then counts towards your own tax bill.
The rate depends on your CIS status:
- 20% if you’re registered for CIS
- 30% if you’re not registered
- Nothing taken off if you have gross payment status
The deduction isn’t taken off the whole invoice. The contractor leaves out VAT and the cost of materials you’ve paid for, along with things like consumables, fuel and hired equipment, then applies the rate to what’s left. In practice that’s mostly the labour. So on a £3,718 labour-only builders clean, a 20% deduction is £743.60, and you’re paid £2,974.40.
Showing the deduction on your invoice means you and the contractor agree on the figure before they pay, and you know exactly what to expect in your account.
How it works in ProCleanerUK
You set both up per customer, once, and ProCleanerUK takes care of the rest.
- Open the customer and go to their invoicing defaults.
- Tick Domestic Reverse Charge VAT (CIS) if the reverse charge applies, and choose the CIS Deduction rate (20% or 30%) if they take a deduction. Then save.
- That’s it. Every invoice for that customer now does it automatically.
On each invoice and PDF, the VAT is shown as “VAT at 20% (reverse charge)” with the amount, and “Reverse charge: Customer to pay VAT to HMRC” sits under the total. The total and the balance due leave the VAT out, so the customer pays you the right amount.
With a CIS deduction set, each invoice shows the deduction, worked out on the labour with stock and materials lines left out, and the amount the contractor will actually pay. The balance due, payment links and reminders all use that amount. When you record their payment, the invoice is marked as paid, and the CIS deduction is shown separately rather than as money the customer paid.
It works on every type of invoice: invoices raised when a job is completed, weekly and monthly consolidated invoices, invoices made from work in progress, and manual invoices. When you create a manual invoice, there’s also a tickbox to switch the reverse charge on or off for that one invoice, for the odd job that’s different.
Quotes follow the same setting. A quote for a reverse charge customer shows the same wording and a total without VAT, so the quote and the invoice always match.
It doesn’t touch your other customers, and it doesn’t affect invoices from your self-employed staff.
If you use Xero
Reverse charge invoices go across to Xero on Xero’s own Domestic Reverse Charge VAT rate, so your books show the VAT correctly too. You don’t have to change anything on the invoice in Xero.
There’s one thing to do first. Xero only has those rates once you’ve added them, which you do once in Xero’s tax rate settings. If they’re missing, ProCleanerUK won’t send that invoice across, and it tells you why. That way an invoice never lands in Xero with VAT the customer doesn’t owe. Once the rates are added, send it again and it goes straight through.
Frequently asked questions
Does reverse charge VAT apply to my normal cleaning contracts? No. It only covers construction services reported under CIS, such as cleaning inside a building during construction work. Regular domestic, office and commercial cleaning is charged VAT in the normal way.
What if my customer is the property owner? If they’re an end user and have told you so in writing, you charge VAT as normal. Just leave the tickbox off for that customer.
Can I use it for one job but not others? Yes. Leave the customer setting off and tick the reverse charge box on that one manual invoice.
Do I need to type the HMRC wording myself? No. ProCleanerUK adds the reverse charge wording and the VAT amount to the invoice for you.
What’s the difference between the reverse charge and the CIS deduction? The reverse charge is about VAT: the contractor pays the VAT to HMRC instead of you charging it. The CIS deduction is about your tax: the contractor takes 20% or 30% off what they pay you and sends it to HMRC towards your tax bill. A construction customer can need one, both or neither.
What if I have gross payment status? Then contractors don’t take a CIS deduction, so leave the customer on No CIS deduction.
Is this tax advice? No. Whether the reverse charge applies depends on the work and the customer, so check with your accountant if you’re unsure. ProCleanerUK makes the invoices right once you’ve decided.
Get started
Reverse charge VAT and CIS deductions come with every ProCleanerUK account. Open a customer’s invoice settings to switch them on. Not using ProCleanerUK yet? Book a demo and we’ll show you how it handles VAT, invoicing and Xero for your cleaning business.