UK Construction Chart of Accounts for Xero: CIS + Reverse Charge

Construction carries its own tax machinery on top of normal VAT, the Construction Industry Scheme (CIS) and the VAT domestic reverse charge, and a generic Xero chart cannot handle either. This is a UK construction chart of accounts built for Xero, with the CIS control accounts in place and the reverse charge already coded onto subcontractor labour. It comes as a readable reference (CSV) and a Xero import CSV.

CIS control accounts on both sides

Under CIS, money moves before anyone records an expense, and Xero needs accounts to track it both ways:

• CIS deductions suffered (an asset): tax contractors withhold from your invoices, recoverable from HMRC. Without it, your sales look short and the recoverable tax vanishes.
• CIS deductions payable to HMRC (a liability): tax you withhold from your subcontractors and owe to HMRC.

The deduction is 20% for registered subcontractors, 30% for unregistered, and 0% under gross payment status, and it is taken from the labour element only.

The labour, materials, and plant split

The chart replaces the generic single subcontractor line with three accounts: subcontractor labour (CIS), materials, and plant and tool hire. The split is not cosmetic. The CIS deduction applies to the labour line only, and the VAT treatment differs across the three, so they have to be separable on every job.

The reverse charge, coded in Xero

Since March 2021, construction subcontractor work between VAT-registered businesses, where the customer is not an end user, falls under the VAT domestic reverse charge: the subcontractor invoices with no VAT and the contractor accounts for it. In Xero this is the tax rate Domestic Reverse Charge @ 20% (VAT on Expenses), and the import sets it as the default on the subcontractor labour account. The Other codes used column notes that an end user reverts to standard 20%, and because the code is only a default, you override any line where the job is for an end user.

Retentions and PPE

Two more construction touches: retention accounts (receivable and payable) track amounts held back pending completion, which otherwise distort debtors and creditors; and protective clothing defaults to Zero Rated Expenses, because industrial safety boots and helmets are zero-rated, with a note that other workwear is standard-rated.

How to use it

1. Open the CSV: each account carries its class, a default Xero VAT code, the allowed alternatives, and a note. The CIS and retention accounts are the construction additions.
2. In Xero, go to Accounting, then Chart of accounts, then Import, and upload the CSV, into a demo org first.
3. Confirm the tax rates, including the domestic reverse charge rates, exist in your org.
4. Keep labour and materials on separate lines on every subcontractor invoice so the CIS deduction calculates cleanly.

The recurring work is keeping each cost coded and split correctly:

• Hubdoc pulls recurring merchant and plant-hire bills into the file.
• ExpenseFlow reads each receipt and bill, codes it to the right construction account with the correct VAT treatment including the reverse charge, and posts it into Xero, so the CIS and reverse-charge handling is applied at capture.
• Dext applies supplier rules for repeat materials suppliers.

One workflow point the chart supports but cannot enforce: before applying a CIS deduction you must verify the subcontractor with HMRC, which sets the 20% or 30% rate (or 0% for gross payment status), and before treating a sale as reverse-charge you should hold the customer’s end-user status in writing. The accounts give you somewhere clean to record both; the verification itself stays a process step.

On QuickBooks instead? See the UK construction chart of accounts for QuickBooks. For the full picture of CIS and the reverse charge, see the UK construction expenses guide.