Reverse charge VAT for construction, explained

When does the reverse charge apply?

All of these must be true:

• You and the customer are both VAT-registered in the UK.
• The work falls within CIS (construction operations).
• The customer is not an end user — i.e. they'll on-sell the work to someone else, typically a main contractor or developer.
• The supply is standard-rated (20%) or reduced-rated (5%) for VAT.

If any of those is false, charge VAT normally.

The end user / intermediary supplier carve-out

If the customer tells you in writing that they're an end user (e.g. a property developer keeping the building for their own use) or an intermediary supplier connected to one, the reverse charge does not apply and you charge VAT normally. Always get this in writing.

How to invoice under reverse charge

1. Show the VAT rate that would have applied (20% or 5%) and the amount of VAT.
2. Do not add the VAT to the total. Total = net only.
3. Include the line: "Reverse charge: customer to pay the VAT to HMRC."

Labour ........................... £2,000.00
Materials ........................ £   800.00
                                    --------
Subtotal ......................... £2,800.00
VAT @ 20% (reverse charge) ....... £   560.00  (for info only)
                                    --------
TOTAL PAYABLE .................... £2,800.00

Reverse charge: customer to pay the VAT to HMRC.

The trap that catches new builders

The reverse charge often runs alongside CIS deductions. The customer takes 20% CIS off your labour and accounts for the VAT themselves. You only see the net of both. Plan your cash flow accordingly — when you first go from charging full VAT to reverse charge, your turnover dips by 20% on paper even though the work is the same.

VAT return

On your VAT return, reverse-charge sales go in Box 6 (net only). The VAT itself goes nowhere on your return — the customer puts it in their Box 1 and Box 4.

For everything else VAT, see the main VAT guide.