Reverse Charge VAT for Construction Services
Understanding when and how to apply the domestic reverse charge for construction in the UK.
What is the Reverse Charge?
The domestic reverse charge for construction is a VAT rule that shifts responsibility for accounting for VAT from the supplier to the customer. Instead of charging VAT, you invoice the net amount and the customer accounts for the VAT themselves.
Key Difference
Standard VAT
- • You charge VAT on your invoice
- • Customer pays you VAT
- • You pay VAT to HMRC
Reverse Charge
- • You invoice net amount (no VAT)
- • Customer accounts for VAT
- • Customer pays VAT to HMRC
When Does It Apply?
The reverse charge applies when all of these conditions are met:
- The supply is within CIS scope (construction operations)
- Both supplier and customer are VAT registered
- The customer is NOT an end user or intermediary supplier
- Payment is reported under CIS
What Services Are Covered?
The reverse charge applies to most construction services that fall within CIS, including:
- Building and construction work
- Alterations, repairs, and decorating
- Civil engineering work
- Installation of heating, lighting, water systems
- Site clearance and demolition
What's Excluded?
- Architecture, surveying, and engineering design
- Manufacture of building materials off-site
- Delivery of materials
- Work on your own property
Who is an "End User"?
End users are NOT subject to reverse charge. An end user is a customer who:
- Uses the building for their own purposes (not reselling construction services)
- Is the final consumer in the construction supply chain
- Does not make onward supplies of construction services
Example: A property developer who sells completed homes is NOT an end user. A restaurant having their kitchen refurbished IS an end user.
How to Invoice with Reverse Charge
Your invoice must include specific wording and show that the reverse charge applies:
Required Invoice Wording
You must include this statement on your invoice:
"Reverse charge: Customer to account for VAT to HMRC"
Reverse Charge with CIS
Yes, reverse charge and CIS can apply to the same invoice:
- Show the net amount (no VAT charged)
- Calculate CIS deduction on the labour portion
- Customer will account for VAT to HMRC separately
Common Mistakes to Avoid
- Charging VAT when reverse charge applies – Customer may refuse to pay VAT
- Missing the required wording – Invoice may be rejected
- Not confirming end user status – Get written confirmation
- Applying to wrong services – Check if work is within CIS scope
Automatic Reverse Charge Invoicing
Experi automatically adds the correct wording and calculates amounts when you enable reverse charge. Works with CIS invoicing too.
VAT Return Treatment
For the supplier (you):
- Include the net value in Box 6 (total value of sales)
- Do NOT include any VAT in Box 1
For the customer:
- Account for VAT as both output tax (Box 1) and input tax (Box 4)
- Include net value in Box 6 and Box 7
Frequently Asked Questions
What if I'm not sure whether to apply reverse charge?
Ask your customer if they're an end user or intermediary. Get written confirmation. If they're NOT an end user and both parties are VAT registered, apply the reverse charge.
Can I reclaim VAT on purchases if I use reverse charge?
Yes, your ability to reclaim input VAT is not affected. You continue to reclaim VAT on your purchases as normal.
What if I make a mistake?
If you charge VAT when reverse charge should apply, issue a credit note and re-invoice correctly. Contact HMRC if you're unsure how to correct errors.