VAT Reverse Charge for Construction — Who Accounts for the VAT

When the domestic reverse charge applies, how to invoice under it, and how it lands on your VAT return, CIS and flat-rate scheme.

If you are a VAT-registered builder supplying CIS-reportable construction services to another VAT-registered business, you usually do NOT charge VAT — the customer accounts for it themselves under the domestic reverse charge (in force since 1 March 2021). You only charge VAT the normal way when the customer is an 'end user' (the final occupier/developer who tells you so in writing), or is not VAT and CIS registered, or the work is zero-rated (e.g. a new build).

Last reviewed: 19 June 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

Does the reverse charge apply to this job?

Apply the reverse charge when ALL of the conditions below are true. If any single one is false, charge VAT the normal way.

☐The service is a CIS-reportable construction operation (constructing, altering, repairing, extending, demolishing or dismantling buildings or structures, and related works).
☐It is standard-rated (20%) or reduced-rated (5%) — not zero-rated.
☐Both you and your customer are VAT-registered in the UK.
☐Both you and your customer are registered for CIS.
☐Your customer is NOT an end user or intermediary supplier.

When it does NOT apply

There are five common situations where the domestic reverse charge does not apply, and you charge VAT the normal way (or charge no VAT, if the supply is zero-rated).

Customer is not VAT-registered

Typically a private domestic customer (homeowner). The reverse charge cannot operate because the customer has no VAT return to account on. Charge VAT at the rate that applies to the work.

Work is zero-rated

Construction of a new dwelling and certain other zero-rated supplies sit outside the reverse charge. The supply is already 0% — there is nothing for the customer to account for.

Supply of staff/workers only

An employment business supplying construction workers (rather than a construction service in its own right) is outside the reverse charge.

Construction goods/materials only

A pure supply of construction goods or materials, with no construction service, is outside the reverse charge.

Customer is an end user or intermediary supplier

If the customer is an end user or intermediary supplier and has told you so IN WRITING, you charge VAT in the normal way. Without the written notification, the reverse charge still applies — see the next section.

End users and intermediary suppliers

Two related concepts decide whether the reverse charge switches off.

End user

A VAT- and CIS-registered business that receives construction services but does NOT make onward supplies of them — the final customer in the chain, typically a developer that retains the completed building or an occupier.

Intermediary supplier

A VAT- and CIS-registered business connected or linked to an end user (for example landlord and tenant on the same land, or companies in the same corporate group). An intermediary supplier can be treated as an end user for reverse-charge purposes.

5% disregard

A business that re-supplies less than 5% (by value) of the construction services it receives can still issue an end-user declaration — the small onward element does not break end-user status.

How to invoice under the reverse charge

Your invoice has to make it obvious to the customer (and to HMRC on inspection) that the reverse charge applies and how much VAT they should self-account for.

☐Do not charge VAT on the invoice — the total payable is the net amount only.
☐State clearly on the invoice that the supply is subject to the domestic reverse charge and that the customer must account for the VAT.
☐Show the VAT rate that applies (20% or 5%), or the amount of VAT to be accounted for — but do NOT add it to the invoice total.
☐The customer pays you the net amount only.

How it lands on the VAT return

Reverse-charge supplies sit on both sides of the customer's return and on neither output-VAT side of the supplier's return.

Reverse charge VAT return treatment

Party	Net amount	Output VAT	Input VAT
Supplier (you)	Record the net sale	NO output VAT on these supplies	N/A on the sale
Customer	Record the net purchase	Account for output VAT on the supply	Reclaim same amount as input VAT

Interactions: CIS, cash accounting, flat rate

The reverse charge does not exist in isolation — it interacts with CIS deductions and with the optional VAT schemes you may currently use.

CIS

The reverse charge follows CIS-reportable services. CIS deductions on labour continue to operate alongside the reverse charge in the normal way — the two regimes run in parallel.

Cash Accounting Scheme

The Cash Accounting Scheme CANNOT be used for reverse-charge supplies. Those supplies must be accounted for on the invoice basis even if the rest of your VAT continues on cash accounting.

Flat Rate Scheme

Reverse-charge supplies are excluded from Flat Rate Scheme turnover. Because you no longer hold the VAT on those sales, the FRS often stops being worthwhile for construction businesses. Review whether to leave the scheme.

Getting it wrong

Three common errors and what they cost.

Charging VAT when the reverse charge applies

The customer should not pay it and cannot reclaim it as input tax. You must correct the invoice and refund the VAT element — and you will have over-declared output VAT on your own return.

Applying reverse charge to a notified end user

If the customer has given you written end-user notification, you should have charged VAT in the normal way. The customer will not self-account, and your VAT return is wrong.

Forgetting the cashflow hit

Subcontractors who previously relied on holding the VAT between invoice date and quarterly return can be caught short when that cash disappears. Re-forecast and consider monthly returns.

Statute references: Value Added Tax Act 1994, s 55A (reverse charge on specified supplies); The Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019 (SI 2019/892); HMRC guidance: VAT domestic reverse charge for building and construction services; HMRC: VAT reverse charge technical guide.

Frequently asked questions

What happens if I miss the Self Assessment deadline?+

The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.

Do I need an accountant or can I file Self Assessment myself?+

Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.

How do payments on account work?+

When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.

Does the reverse charge apply to materials?+

If materials are supplied as part of a single reverse-charge construction service, the whole supply follows the reverse charge. A pure supply of materials with no associated construction service is outside the reverse charge.

Does it apply to work for a homeowner?+

No. Private domestic customers are not VAT-registered, so the reverse charge cannot apply. Charge VAT as normal at the appropriate rate.

What if my customer will not confirm whether they are an end user?+

You must apply the reverse charge until they confirm in writing that they are an end user (or intermediary supplier treated as one). The default position is reverse charge; the end-user exemption only switches on once you hold the written notification.

What about snagging?+

Snagging — remedial works to correct faulty workmanship — stays within the reverse-charge rules. It does not, by itself, make the contractor an end user, and the original VAT treatment of the underlying job continues to apply.

Does scaffolding count?+

Scaffolding has specific HMRC guidance. The treatment depends on whether it is hire-only (often outside the reverse charge as a supply of goods/equipment hire) or supplied with labour (erection/dismantling, which is a CIS construction service and inside the reverse charge). Check HMRC's reverse charge technical guide before invoicing.