Win a public-sector contract as a small subcontractor and two HMRC schemes — CIS and the VAT domestic reverse charge — can change how much cash actually lands in your account, and when. Neither is a bid requirement in the way SSIP or a bond can be, but both affect what you should quote and expect to be paid. Here's what each means in practice.
CIS is an HMRC scheme covering most construction work in the UK: contractors deduct tax from what they pay subcontractors and send it straight to HMRC on the subcontractor's behalf, ahead of that subcontractor's own Self Assessment or Corporation Tax bill. The deduction applies only to the labour element of an invoice — materials, plant hire, fuel and VAT are excluded from the deduction.
20% if you're registered as a CIS subcontractor, 30% if you're not registered, or 0% if you hold gross payment status (a higher bar, usually for larger, established firms with a clean compliance record). Registering is a separate step from registering as self-employed or incorporating — most subcontractors register for both together, and almost always benefit from doing so, since the alternative is the higher 30% deduction eating into cash flow every payment.
For VAT-registered construction businesses invoicing another VAT-registered, CIS-registered construction business (not an "end user" like a property owner building for their own use), the reverse charge shifts responsibility for VAT to the customer. You invoice without adding VAT, marking the invoice "VAT domestic reverse charge applies — customer to account for VAT to HMRC"; your customer then declares that VAT themselves. One practical upside for small firms: reverse-charge sales don't count towards your VAT registration threshold (£90,000 as of the 2026/27 tax year), which can matter if you're close to it.
Both schemes affect cash flow, not the total tax you ultimately owe — but cash flow is exactly what catches small firms out mid-contract. A CIS deduction means you're paid less upfront than your invoice total, with the difference only recovered when you file your return; a reverse charge means you never receive VAT on that invoice to hold as working capital in the meantime. Building both into your cash-flow forecast before you bid — not after you've won — avoids a nasty surprise on the first payment.
No — CIS and the reverse charge aren't pass/fail bid criteria the way SSIP accreditation or a bid bond can be; they're tax-administration mechanics that apply automatically once you're doing CIS-qualifying construction work with a CIS-registered, VAT-registered customer. You don't need to prove anything about either scheme in your tender submission. You do need your bookkeeping to handle them correctly once you're being paid — most small-firm accounting software (and any accountant used to construction clients) handles both routinely.
Next step: if you're new to public-sector bidding, check today's live opportunities in your trade — construction & trades, building maintenance, M&E — or join the waitlist to get matched contracts by email while you get your CIS registration and cash-flow numbers sorted.
Sources: GOV.UK CIS340 guidance, HMRC domestic reverse charge guidance, published 2026 UK accountancy-firm explainers (BDO, Xero, Crunch, Price Bailey), as of July 2026. General information, not tax or legal advice — always confirm your specific CIS and VAT position with a qualified accountant.
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