# Construction e-invoicing: CIS, reverse charge and 2029

> How the 2029 e-invoicing mandate meets construction: CIS deductions, the VAT domestic reverse charge, applications for payment and self-billing.

- Canonical URL: https://einvoices.uk/news/e-invoicing-construction-cis
- Published: 20 October 2026 (2026-10-20)
- Last updated: 20 October 2026 (2026-10-20) (not updated since publication)
- Author: Floris Lindenaar, Editor, e-invoicing expert (https://einvoices.uk/authors/floris-lindenaar)
- Publisher: einvoices.uk (https://einvoices.uk)
- Type: Guide
- Topics: Sectors, VAT, 2029 mandate, Compliance
- Language: en-GB (UK English); covers the United Kingdom

## Sources

- [VAT domestic reverse charge technical guide](https://www.gov.uk/guidance/vat-reverse-charge-technical-guide)
- [How to use the VAT domestic reverse charge if you supply building and construction services](https://www.gov.uk/guidance/how-to-use-the-vat-reverse-charge-if-you-supply-building-and-construction-services)
- [What you must do as a Construction Industry Scheme (CIS) contractor](https://www.gov.uk/what-you-must-do-as-a-cis-contractor)
- [Buildings and construction (VAT Notice 708)](https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708)
- [Self-billing (VAT Notice 700/62)](https://www.gov.uk/guidance/self-billing-notice-70062)
- [Promoting electronic invoicing across UK businesses and the public sector: consultation response](https://www.gov.uk/government/consultations/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector/outcome/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector-consultation-response)

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Construction is the UK sector where invoicing is most complicated. A single subcontract payment can involve a **CIS deduction**, the **VAT domestic reverse charge**, an **application for payment**, a **retention** and sometimes a **self-billed** invoice raised by the contractor. The 2029 mandate does not change any of those rules. It does change the format: from **April 2029**, VAT invoices between VAT-registered businesses must be structured e-invoices.

This guide maps each construction practice onto e-invoicing, and flags what is not yet settled.

## CIS is not VAT, but it shapes the invoice

The Construction Industry Scheme deducts tax at source from subcontractors' pay: **20%** for registered subcontractors, **30%** for unregistered ones, and **0%** for those with gross payment status. HMRC's [contractor guidance](https://www.gov.uk/what-you-must-do-as-a-cis-contractor) sets out the calculation:

1. Start with the gross amount on the subcontractor's invoice.
2. Take away **VAT**, materials the subcontractor paid for directly, consumable stores, fuel (except for travelling), plant hire, and manufacturing or prefabricating materials.
3. Apply the CIS rate to what is left.

The contractor then gives a **payment and deduction statement** within 14 days of the end of each tax month.

### Worked example

A registered subcontractor (20% CIS) invoices £10,000 labour plus £2,000 materials it bought itself. The work is reverse-charged, so no VAT appears as payable on the invoice.

| | £ |
|---|---|
| Labour | 10,000 |
| Materials | 2,000 |
| Invoice total (VAT: reverse charge, customer accounts) | 12,000 |
| CIS deduction: 20% × 10,000 | (2,000) |
| Paid to subcontractor | 10,000 |

The VAT invoice is for **£12,000**. The CIS deduction reduces the **payment**, not the value of the supply. In EN 16931 terms, it must **not** be entered as a document-level "allowance", because allowances reduce the VAT taxable amount. EN 16931 has no dedicated field for a tax withheld at source. **How CIS deductions should appear in a UK e-invoice, if at all, has not been confirmed.**

## The VAT domestic reverse charge

Since **1 March 2021**, most standard- and reduced-rated construction services between VAT-registered businesses have used the reverse charge, where payment is reported under CIS. The customer accounts for the VAT. It does not apply where the customer is an **end user** or **intermediary supplier** that has given written confirmation, and it does not apply to employment businesses supplying staff.

HMRC's [technical guide](https://www.gov.uk/guidance/vat-reverse-charge-technical-guide) says the invoice must contain all the usual VAT invoice details and state that the reverse charge applies. Acceptable wording includes:

- "VAT Act 1994 Section 55A applies"
- "S55A VATA 94 applies"
- "Customer to pay the VAT to HMRC"

There is also a **5% disregard**. If the reverse-charge element is 5% or less of the whole supply, both parties can agree at the start of the contract to ignore it. This is judged on overall contract values, not invoice by invoice.

### In an e-invoice

EN 16931, the standard behind Peppol BIS Billing 3.0, has a VAT category for this: **AE ("Reverse charge")**. Its rules require:

- a **0%** VAT rate on reverse-charged lines (BR-AE-05)
- the **seller's VAT identifier** and the **buyer's VAT identifier** or legal registration identifier (BR-AE-02)
- an exemption reason code or the text "Reverse charge" in the VAT breakdown (BR-AE-10)

Software that cannot show reverse-charge VAT should add wording telling the customer to account for it to HMRC, as the technical guide says. A free-text invoice note can carry the HMRC wording. See [UK VAT category codes in Peppol](https://einvoices.uk/news/uk-vat-category-codes-peppol) and the dedicated guide to [reverse charge e-invoices](https://einvoices.uk/news/domestic-reverse-charge-construction-e-invoice).

## Applications for payment, tax points and authenticated receipts

[VAT Notice 708](https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708) (section 23) explains why construction invoicing looks different from other sectors:

- For contracts with **stage or periodic payments**, the tax point is the **earlier of receiving payment or issuing a VAT invoice**. There is no basic tax point when the work is finished, unless anti-avoidance rules apply.
- So many firms send an **application for payment** (not a VAT invoice) and raise the VAT invoice only when they are paid.
- **Retentions** have a delayed tax point: when the retention is paid or invoiced, whichever comes first.
- **Authenticated receipts** are an alternative: the customer prepares a receipt, and the supplier authenticates it after payment. HMRC is clear that "an authenticated receipt is not a VAT invoice". It can only be used for periodic-payment contracts, and must contain all VAT invoice particulars.

**Not yet confirmed:** whether authenticated receipts will survive the mandate, and whether applications for payment will need a structured equivalent. The application-then-invoice pattern fits e-invoicing well: the e-invoice is issued when payment is received.

## Self-billing by main contractors

Many main contractors **self-bill** their subcontractors. They raise the VAT invoice on the subcontractor's behalf under a written agreement, mark it "SELF-BILLING", and send it with payment ([VAT Notice 700/62](https://www.gov.uk/guidance/self-billing-notice-70062)). Under the reverse charge, where the original supply was self-billed, the **customer** raises any credit note.

Peppol already publishes a **BIS Self-Billing 3.0** specification, which uses invoice type code 389. HMRC's [consultation response](https://www.gov.uk/government/consultations/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector/outcome/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector-consultation-response) said concerns about "self-billing and the VAT reverse charge" have been addressed in other countries' mandates. The UK's own rules are still to come. See [self-billing and e-invoicing](https://einvoices.uk/news/self-billing-e-invoicing-uk).

## Councils and housing associations as customers

Local authorities, government departments and housing associations can be **deemed contractors** under CIS once they spend more than £3 million on construction in 12 months. Work for them can carry CIS deductions on top of public-sector invoicing rules. See [invoicing a council](https://einvoices.uk/news/local-council-e-invoicing-suppliers).

## What changes, and what does not

| | Changes in 2029? |
|---|---|
| CIS rates, verification, monthly returns | No change announced |
| Reverse charge rules and invoice wording | Rules unchanged; format becomes structured (category AE) |
| VAT invoices between VAT-registered businesses | Must be e-invoices from April 2029 |
| Applications for payment | Not VAT invoices; treatment not yet confirmed |
| Authenticated receipts | Not yet confirmed |
| Self-billing | Expected to continue; UK rules not yet published |
| Real-time reporting to HMRC | Not at launch |

## What to do now

1. **Map your documents.** List every document you send or receive: applications, VAT invoices, authenticated receipts, self-bills and payment and deduction statements. Note which ones are VAT invoices.
2. **Check reverse-charge coding** in your software now. Wrong VAT treatment is the error most likely to fail validation.
3. **Ask your software provider** how it will carry CIS deductions alongside a Peppol invoice without touching the VAT totals.
4. **Collect subcontractor VAT numbers and CIS status** in clean master data. See [master data cleanup](https://einvoices.uk/news/master-data-cleanup-e-invoicing).

This is general information, not tax advice. For specific cases, follow HMRC's guidance or speak to an adviser. See also the [mandate guide](https://einvoices.uk/mandate) and [timeline](https://einvoices.uk/timeline).

## Frequently asked questions

### Does CIS change under e-invoicing?

No change to CIS has been announced. CIS is a deduction scheme for income tax and National Insurance, not VAT, so the e-invoicing mandate does not alter it. What is not yet known is how CIS deductions will be shown alongside a structured VAT e-invoice.

### How do you show the domestic reverse charge on an e-invoice?

In an EN 16931 or Peppol invoice, reverse-charged lines use VAT category code AE with a 0% rate, the buyer's VAT number, and the exemption reason 'Reverse charge'. HMRC also requires wording such as 'Customer to pay the VAT to HMRC'. Whether the UK adds extra rules has not been confirmed.

### Is an application for payment a VAT invoice?

Not normally. An application for payment is a request. In construction stage-payment contracts, the tax point is the earlier of receiving payment or issuing a VAT invoice, so the VAT invoice is often raised only when payment arrives.

### Can main contractors keep self-billing subcontractors after 2029?

Self-billing is common in construction, and Peppol already has a self-billing specification. HMRC has said self-billing has been handled in other countries' mandates, but the UK's detailed rules have not been published.

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How to cite: "Construction e-invoicing: CIS, reverse charge and 2029", einvoices.uk, 20 October 2026, https://einvoices.uk/news/e-invoicing-construction-cis

einvoices.uk is an independent publication and is not affiliated with HMRC or the UK Government. Nothing here is tax advice; check the sources and official GOV.UK guidance before acting.