The domestic reverse charge changes who accounts for VAT on certain construction services. When it applies, the supplier does not add the VAT to the amount the customer pays. The VAT-registered customer accounts for that VAT on its own return. It is not the same as a CIS deduction.

Use the conditions, not a rule of thumb

HMRC says a supplier must use the reverse charge when all of these points apply:

• the supplier is VAT registered in the UK;

• the customer is VAT registered in the UK;

• the work is a covered building or construction service;

• the payment is reported under CIS;

• the service is standard rated or reduced rated;

• the supplier is not an employment business supplying staff or workers; and

• the customer has not given written confirmation that it is an end user or intermediary supplier.

Check the complete conditions in HMRC's supplier guidance. If one condition is not met, normal VAT rules may apply.

A supply-chain example

Illustrative example: a VAT-registered electrical subcontractor carries out standard-rated installation work for a VAT-registered main contractor. The contractor will include the payment on its CIS return and is buying the work to supply onwards. If no exclusion applies, the subcontractor issues a reverse-charge invoice.

If the same electrician works directly for a private householder, the reverse charge does not apply because the customer is not VAT registered. The electrician follows the normal VAT rules for that supply.

End users need written confirmation

An end user buys the construction service for its own use rather than to make an onward supply of that service. The reverse charge does not apply to an eligible end user or intermediary supplier when it gives the supplier written notification.

Do not assume that the final organisation in a chain is automatically an end user. HMRC gives the term a specific meaning. Keep the written notification with the job records.

Read the detailed HMRC guidance on end users and written notification.

What the invoice should show

A reverse-charge invoice still needs the information required on a VAT invoice. It must also make clear that the reverse charge applies. HMRC says the precise wording is not prescribed, but gives examples including:

HMRC example invoice wording: “Reverse charge: customer to pay the VAT to HMRC.”

The amount of VAT to be accounted for should normally be stated, but it should not be included in the total VAT charged. Check HMRC's invoice guidance for the construction reverse charge.

A simple invoice example

This example is fictional and assumes a standard-rated service worth £2,000 before VAT.

• Net value of construction service: £2,000

• VAT rate: 20%

• VAT for the customer to account for: £400

• Amount payable to the supplier before any separate CIS deduction: £2,000

The invoice would state that the customer must account for the £400 reverse-charge VAT. The supplier would not include that £400 in the amount due.

Keep CIS and VAT calculations separate

CIS decides whether the contractor deducts an amount from the payment. The VAT reverse charge decides who accounts for VAT. Work through each rule separately and show enough information for the customer to check both.

Use the CIS deduction calculator for the deduction side, then read CIS for subcontractors if you need the full payment process.

Check the cash you will actually receive

Do not include reverse-charge VAT in the amount you expect to arrive in the bank. If a separate CIS deduction also applies, the payment can be lower again. Match the remittance and the CIS deduction statement to the invoice so you can explain the difference.

Keep the tax treatment separate from the customer's commercial payment terms. Using the reverse charge does not change an agreed due date or mean the work has been paid.

Ask before guessing

Mixed supplies, design work, labour supplied through an employment business, zero-rated work and a change in customer status can alter the treatment. Get written customer information and check the HMRC flowcharts. If the answer is still unclear, ask an accountant or HMRC before issuing the invoice.

Written by Chris, founder of TradePilot. General information, not VAT advice. The treatment depends on the particular supply, customer and evidence. Last reviewed 16 September 2026 against the official sources linked above.