What it is

For most construction work between VAT-registered businesses, the supplier no longer charges VAT. The customer accounts for it on their own VAT return instead. No VAT changes hands.

When it applies

  • Both parties are VAT registered
  • Both parties are in CIS
  • The work is a specified service, which covers most construction
  • Your customer isn't the end user of the building

When it doesn't

  • Supplies to end users, such as the property owner
  • Intermediaries connected to end users, where they've told you in writing
  • Zero-rated work, such as new build housing

The invoice wording

Your invoice still shows the VAT rate that would apply, plus one sentence HMRC expects to see: "Reverse charge: customer to account for VAT to HMRC." Miss the sentence and the invoice is wrong.

The mistake we fix most

Charging VAT to a contractor when the reverse charge should have applied. That means credit notes, corrected invoices and amended returns, and it's tedious for everyone. We check reverse charge treatment as standard when a construction client joins.