Reverse charge invoices for construction work.

When the reverse charge applies

The VAT domestic reverse charge for construction has applied since 1 March 2021. The customer accounts for the VAT to HMRC instead of paying it to you.

The reverse charge applies only when all of these are true:

• You and your customer are both registered for VAT
• The payment is reportable under CIS
• The work is standard or reduced rated
• The work is not the supply of staff by an employment business
• The customer has not told you in writing that it is an end user or an intermediary supplier

Which invoices are reverse charged

Every customer has a Customer type, and only Principal contractor can bring the reverse charge. No other type does, even with a VAT number on file.

The type is changed on the customer’s record. An invoice still in draft follows the change when it is issued. Invoices already sent are not changed.

An invoice to a Principal contractor whose VAT number is on file is reverse charged when:

• You are registered for VAT
• The customer’s Charge VAT on their invoices switch is on
• No end-user notice is on file
• At least one line is at 20% or 5%. An invoice that is all zero rated is not reverse charged.
• The invoice names premises, as a job’s invoice always does
• The job’s Kind of work, if it has one, has Construction work ticked

What the invoice shows

HMRC says the VAT the customer accounts for should be stated on the invoice, but not included in the VAT charged. The office states it on its invoice and quote screens, on the PDFs and on your customer’s own quote page.

The office’s own invoice shows:

• Each line at 20% or 5%: its own rate, with no VAT amount
• Any other line: 0%, or what it is, such as Exempt or Disbursement
• VAT charged: zero
• VAT to be accounted for by the customer: the VAT on the lines at 20% and 5%, each at its own rate
• Under the totals, in a box: “Reverse charge: VAT Act 1994 Section 55A applies”
• Your VAT number, if it is on file
• The customer’s VAT number under “Billed to”, as it was when the invoice was issued

End users and intermediary suppliers

A contractor that is an end user or an intermediary supplier tells you so in writing. With their VAT number on file, the Reverse charge row on their record reads Applies until a notice is recorded.

The notice is recorded as They are an end user or They are an intermediary, with the date in Told us in writing on. That date cannot be after today. Invoices issued after the notice is recorded charge VAT as usual. The office’s own invoice prints: “The customer notified us on 3 September 2026 that it is an end user or intermediary, so the domestic reverse charge does not apply.”

The notice changes the VAT only. The customer’s type stays Principal contractor. An end user can still deduct CIS from what it pays you.

CIS on a reverse charge invoice

CIS and the reverse charge are separate schemes. CIS comes off the labour when the contractor pays, and the invoice keeps its full net.

The amount the contractor deducted is recorded as Tax withheld at source, never as a discount.