by Asim Abbas
11 November 2026 
VAT domestic reverse charge for construction: a practical guide
VAT domestic reverse charge for construction: a practical guide
If you work in construction and you’re VAT registered, the domestic reverse charge changes who accounts for VAT on many of your invoices.
- Applies to CIS-reportable construction services
- Customer must be VAT and CIS registered
- Doesn’t apply to end users or intermediaries who tell you
- Invoices must state the reverse charge wording
Instead of the subcontractor charging VAT, the contractor accounts for it. It was introduced to tackle VAT fraud, but it often catches out smaller firms.
This guide explains when the reverse charge applies, what to put on invoices and how it affects your cash flow.
What the reverse charge does
Normally a supplier charges VAT and pays it to HMRC. Under the domestic reverse charge, the supplier doesn’t charge VAT. The customer works out the VAT, pays it to HMRC and reclaims it on the same VAT return, so for most contractors the net effect is nil.
When it applies
- The service is reported under the Construction Industry Scheme
- It’s standard or reduced-rated, not zero-rated
- Both supplier and customer are VAT registered
- The customer is registered for CIS
- The customer isn’t an end user or intermediary
When it doesn’t apply
- End users: the customer receiving the service doesn’t make onward supplies of it, such as a developer or property owner who confirms in writing
- Intermediaries: businesses connected to an end user who confirm their status
- Zero-rated work: such as building new homes
- Homeowners: domestic customers aren’t CIS registered
- Labour agencies and employment businesses
CIS tax rebate calculator
See if you’re owed a refund.
What to put on your invoice
Show the VAT rate and VAT amount for information, but don’t include it in the total. Add wording such as: Reverse charge: customer to account to HMRC for the VAT. Keep evidence that the customer is VAT and CIS registered and hasn’t told you they’re an end user.
Dev, a VAT-registered plasterer, invoices a main contractor £10,000 for plastering on a commercial refurbishment. He shows VAT of £2,000 on the invoice but only asks for £10,000. The contractor deducts CIS at 20% on Dev’s labour and pays the balance. The contractor records £2,000 output VAT and £2,000 input VAT on its VAT return.
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Get a fixed-fee quoteCall 0161 531 4179Cash flow effects
Subcontractors no longer hold customers’ VAT, so many end up in a regular VAT repayment position, since they still pay VAT on materials and van costs. Moving to monthly VAT returns can speed up repayments. The Flat Rate Scheme rarely works for reverse charge businesses, because reverse charge sales are excluded from it.
Materials and mixed supplies
If an invoice includes both reverse charge and normal services, the whole invoice falls under the reverse charge. Materials supplied as part of the construction service are covered too. Pure supply of materials without installation isn’t.
Practical checks
- Check customers’ VAT numbers with HMRC’s online checker
- Verify CIS status when you start work for a contractor
- Get end user notifications in writing
- Make sure your accounting software uses the right VAT codes
Read HMRC’s reverse charge guidance, our CIS guide and our CIS accountancy service.
What should I do next?
VAT, CIS and end user.
Reverse charge note.
Faster VAT repayments.
Frequently Asked Questions
Who pays VAT under the reverse charge?
The customer, usually the main contractor, accounts for the VAT instead of the subcontractor.
Does the reverse charge apply to homeowners?
No. Domestic customers are not CIS registered, so you charge VAT normally.
What is an end user?
A customer who receives construction services but doesn’t supply them onward, and confirms this in writing.
Do I show VAT on a reverse charge invoice?
Yes, for information, but don’t include it in the amount due.
Can I use the Flat Rate Scheme with the reverse charge?
Reverse charge sales are excluded, so the scheme rarely suits these businesses.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Ali Imran
I’m Ali Imran, an accountant at Wingate Accountants. I help sole traders, landlords and directors get their returns filed early and accurately, without the last-minute panic.
