The VAT reverse charge in construction: who charges VAT, and who does not
For most building work between VAT-registered businesses, the customer accounts for the VAT, not the supplier. How to tell when it applies, and what the invoice must say.
Since March 2021, the VAT domestic reverse charge has applied to most building and construction services. Instead of the subcontractor charging VAT and paying it to HMRC, the contractor receiving the service accounts for it on their own return, and usually reclaims it in the same return. It was brought in to stop fraud where VAT was collected and never paid over.
When it applies
All of these must be true: the supplier and customer are both VAT-registered, the service is at the standard or reduced rate, the payment is reported under CIS, and the customer is not an end user or an intermediary supplier connected to one.
In and out of scope
- Building, altering, repairing, demolishing
- Installing heating, lighting, power, drainage
- Painting and decorating
- Site clearance, foundations, scaffolding
- Architects’ and surveyors’ work
- Making or delivering materials
- Installing security systems and CCTV
- Signwriting and artwork
End users
A customer who is the final client, using the building rather than selling on the construction service, should tell suppliers in writing that they are an end user. Supplies to them are invoiced with VAT in the normal way.
Getting the invoice right
- State that the reverse charge applies, and the customer’s obligation to account for the VAT.
- Show the VAT rate and the amount of VAT the customer must account for, without adding it to the total.
- Check the customer’s VAT number and CIS status before the first invoice.
Sources
More on
This insight is general information, not advice for your circumstances. Talk to us before acting on it.