Cost Plus Contracts for UK Builders: How to Invoice Costs Plus a Markup

Plenty of builders run cost plus jobs without calling them that. When nobody knows what is behind the plaster, the honest answer to “how much?” is “what it costs, plus my margin”. This guide is about invoicing that properly, so the client trusts the bill and you are paid for every pound you spent.

What Is a Cost Plus Contract?

A cost plus contract pays the builder the actual cost of the work plus a fee, either a percentage of the costs or a fixed sum agreed at the start. The client carries the risk that the job costs more than expected; the builder has to spend the client’s money sensibly and show where it went.

There are two standard forms in the UK:

• The JCT Prime Cost Building Contract. The current edition is PCC 2024. JCT describes it as suited to work that has to start before its full extent is known, such as repairs after fire damage. The contractor recovers the “prime cost” of labour, materials and plant, reasonably and properly incurred, plus a fee. See the JCT product page.
• NEC4 Engineering and Construction Contract, Option E (cost reimbursable). The contractor is paid its defined cost plus a fee percentage. It is more common on larger and public sector work.

Most domestic cost plus work runs on a short written agreement. That is fine, provided it says what counts as a cost, what the markup is, how often you invoice, what evidence you provide and when payment is due. For anything substantial, take advice on the contract rather than relying on a template.

When Does Cost Plus Make Sense, and When Is Fixed Price Better?

Cost plus suits a job you cannot price honestly at the start:

• Unknown existing conditions. Old houses, listed buildings, fire and flood repairs, anything where opening up will change the scope.
• A client who wants to choose as they go. Kitchens, finishes, joinery and landscaping picked during the build.
• An early start. The client wants work on site before the design is finished.

Fixed price suits a job with full drawings and a clear specification, and is simpler to invoice: you draw down an agreed price, as covered in our guide to construction invoicing month by month.

The trade is risk against reward. On fixed price you can beat your planned margin, or lose money. On cost plus your margin is protected, but the client will read every invoice, which is why the paperwork matters more here than anywhere else. Signed change orders on a fixed price job cover some of the same ground.

What Markup Do UK Builders Charge on Cost Plus Work?

There is no fixed rate. Procore’s UK guide to cost plus contracts puts contractor fees at 5% to 20% on UK schemes, and uses a 10% fee in its worked example under the JCT Prime Cost Contract (Procore UK, checked 2 November 2026). Where you sit in that range depends on a few things:

• What the fee has to cover. If your own site management, van, small tools and office time are not charged as costs, the markup has to pay for them. A low markup on a job where nothing of yours is recoverable is a loss dressed as a margin.
• How much the client changes things. Constant changes cost you time that never appears on a supplier invoice.

Whatever you agree, write down whether the markup applies to everything, or to materials and subcontractors only, and whether it is a percentage or a fixed fee. If it is a fixed fee, agree how it changes if the scope grows.

What Goes on a Cost Plus Invoice?

A cost plus invoice is a list of what the work cost since the last invoice, followed by your markup and the VAT. A clear one has:

1. Each cost as its own line, at cost. Supplier, their invoice number, the date, the cost code or trade, and the amount before VAT. A client, or their quantity surveyor, should be able to tick each line against the supplier’s invoice behind it.
2. A subtotal by cost code, so the client can see the money going into groundworks, roofing or the kitchen.
3. One markup line on the total of the costs, at the agreed percentage. One calculation on the total, not a markup hidden in every line, keeps the arithmetic easy to check and rounds only once.
4. The total before VAT, the VAT, and the total to pay.
5. The supplier invoices as evidence. Copies of every supplier and subcontractor invoice on the claim, in the same order as the lines.
6. The period it covers (“costs up to 31 October”), so the next invoice starts where this one stopped.

A worked example, with a 15% markup and VAT at 20%:

Line	Amount
Groundworks: three supplier and subcontractor invoices	£7,850.00
Roofing: two invoices	£4,550.00
Costs	£12,400.00
Markup at 15%	£1,860.00
Net	£14,260.00
VAT at 20%	£2,852.00
Total	£17,112.00

Showing costs at cost and the markup separately is what makes the invoice believable. A client who sees the merchant’s own invoice for £2,140 of blocks has nothing to query. A client who sees “materials, £2,461” will ask.

How Do VAT and CIS Work on a Cost Plus Job?

VAT. If you are VAT registered, the client is charged VAT at the rate that applies to your building work, on the costs and the markup together. You do not pass the supplier’s VAT through. You reclaim the VAT your suppliers charged you as input tax in the normal way, and the costs go on the client’s invoice before VAT. The supplier’s rate and your rate can differ: a CIS subcontractor who is not VAT registered charges none, a merchant charges 20%, and your work for the client might be standard rated, reduced rated for some conversions, or zero rated for most new dwellings. HMRC’s VAT Notice 708: buildings and construction sets out which rate applies to which work, and Procore’s guide points to the same notice for reimbursed costs.

A cost you bought in your own name and pass on is part of your supply to the client, not a disbursement, so it takes your VAT treatment. HMRC’s guidance on disbursements in VAT Notice 700 explains the narrow cases where something is a true disbursement. If you are not VAT registered, the supplier’s VAT is part of your cost, because you cannot reclaim it. Ask your accountant which applies to you.

The domestic reverse charge. If your client is itself a VAT and CIS registered business that is not the end user (a main contractor, say), the domestic reverse charge for construction services usually applies from 1 March 2021, and you do not charge the VAT. It does not apply to a homeowner. HMRC’s domestic reverse charge guidance has the detail.

CIS. When you pay subcontractors under the Construction Industry Scheme, you deduct CIS from the labour part of their invoices and pay it to HMRC. The cost of that work to the job is still the subcontractor’s full invoice before VAT: the deduction is their tax, paid on their behalf, not a saving. So the line on the client’s invoice is the subcontractor’s net figure, not what you transferred to their bank. If you are the subcontractor and your client is a contractor, they will deduct CIS from the labour part of your invoice, so keep labour and materials clear. Our CIS guide covers the scheme itself.

None of this is advice on your own position: check anything unusual with your accountant before the first invoice goes.

How Do You Stop Claiming the Same Invoice Twice?

The common mistakes are bookkeeping ones: a late merchant’s invoice added to two claims, a subcontractor’s invoice left in the site manager’s van and never claimed.

The habits that prevent them:

• Every supplier invoice goes on the job when it arrives, with its cost code, not when the claim is being put together.
• Each cost can be on one claim only. Once it is on a claim, draft or final, it should not be offered again.
• Each claim has a cut-off date. “Everything up to 31 October” makes the next claim’s starting point obvious.
• Cancelling a claim gives its costs back, so they go on the next one rather than vanishing.
• When a job moves between systems part way through, mark what has already been claimed, so the new system starts from the right place.

A careful spreadsheet with one person keeping it can do this. It struggles when invoices arrive to several inboxes or more than one person prepares claims.

How BuildersAI Invoices a Cost Plus Job

BuildersAI is the all-in-one site management app for UK builders, and it covers the money side of the whole job, from the estimate to the last invoice. A cost plus job is set up once on the job’s Cost Tracker: choose Cost plus and type the agreed markup.

• ✓ Supplier invoices on the job as they arrive. Drop in the PDF or a photo, and the supplier, number, dates, net and VAT are read for you to check, with a cost code and any CIS deduction. A week of invoices can go in at once. See supplier invoices.
• ✓ Costs since the last claim, in one click. On a new invoice to the client, choose a cut-off date and Add costs since the last claim. Every supplier invoice up to that date that is not on another invoice is ticked. Costs typed without an invoice are listed for you to tick if you want them on.
• ✓ Each cost at cost, once. Every cost goes on as its own line, grouped by cost code. A cost can be on one invoice only, drafts included, and cancelling an invoice gives its costs back for the next claim. A supplier invoice already claimed somewhere else can be marked Already invoiced to the client, so it is never offered.
• ✓ One markup line and your VAT rate. The markup is worked once on the total of the costs and shown as its own line, then VAT at the rate you set for the work, never the supplier’s.
• ✓ The supplier invoices as evidence. Download with invoices gives one PDF: a first page listing every cost and the totals, then each supplier invoice in the same order. With QuickBooks Online connected, the invoice goes to QuickBooks as a draft for you to check and send, with each supplier invoice’s PDF attached to it there.
• ✓ The client’s view of the money. Switch it on, and the client sees the supplier invoices you share, your markup on them, what has been invoiced, what is not invoiced yet and what they have paid, in the app. Timesheet labour and costs you typed yourself stay out of it unless you put one on an invoice, and you can hide any supplier invoice.
• ✓ Payments back on the job. When the client pays in QuickBooks, the payment is read back onto the job’s Cost Tracker.

The same job holds the drawings, photos and site diary, so a query about a line can be answered with the delivery photo. Fixed price jobs invoice from the accepted estimate and signed change orders instead, as described on invoices to the client. For how the money side fits together, see our guide to construction cost management software. If you are moving cost plus jobs across from another system, our Buildertrend alternatives guide covers the switch.

The steps are on the estimates help page, what the client sees is on the client’s money page, and the QuickBooks side is on connecting QuickBooks.

Pricing is flat, with no per-user fees: BuildersAI Starter is £149 a month for up to 10 people, Professional is £299 a month for 11 to 50, and Business is £599 a month for 51 to 100, all plus VAT, with a 14-day free trial. See the pricing page.

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