A plain-English guide for construction subcontractors and contractors.
The VAT domestic reverse charge for building and construction services has been in effect since 1 March 2021. It changed who hands the VAT to HMRC on construction work between VAT-registered businesses.
It was brought in to tackle "missing trader" VAT fraud in construction - stopping VAT being collected and then never passed on to HMRC.
You invoice the contractor and add VAT on top.
The contractor pays you the full amount, VAT included.
You pay that VAT on to HMRC with your VAT return.
You invoice with the VAT rate shown - but not added to the total.
The contractor pays you the amount without the VAT.
The contractor accounts for the VAT directly to HMRC.
HMRC's rule is blunt about it: suppliers must not enter any output tax on sales that fall under the reverse charge.
The reverse charge applies when all of the conditions on the left are met - and doesn't in the cases on the right.
An "end user" is a business that doesn't make an onward supply of the construction services it receives. If you're not sure which side a job falls on, ask GOV.UK or your accountant before you invoice.
Answer four questions about the job you're about to invoice.
Are you and your customer both VAT-registered?
Is it CIS work - reported under the Construction Industry Scheme, whether or not tax is deducted?
Is the supply standard-rated (20%) or reduced-rated (5%)?
Has the customer told you in writing they're an "end user" or "intermediary supplier"?
Answer all four to see where the invoice stands.
A quick guide, not tax advice - confirm with GOV.UK or your accountant if you're unsure.
Get the wording right, and the numbers add up for both of you.
Everything a normal VAT invoice needs - your details, the customer's, the work, and your VAT number.
Make clear the reverse charge applies and the customer accounts for the VAT - for example "Reverse charge: customer to pay the VAT to HMRC".
Show the VAT rate or amount that applies, but don't include that VAT in the total the customer pays you.
Where you supply materials as part of the work, the reverse charge covers the whole supply, not just the labour. It's only materials sold on their own, with no construction work, that fall outside it.
Invoice #0147
AJ Electrical - VAT No. GB 123 4567 89
Reverse charge: customer to pay the VAT to HMRC
The VAT is on the invoice for the contractor's return - it just isn't in the total.
You shouldn't have to remember the reverse charge rules on every invoice. ProWorks builds it in.
Store your VAT registration and CIS status once in your tax settings, so it's applied consistently rather than remembered job by job.
ProWorks applies CIS reverse-charge VAT on invoices where it applies, so the VAT is shown correctly and left out of the total the customer pays.
Every invoice is recorded and exportable as CSV, so your accountant or VAT software has clean figures to work from when the return is due - or give your accountant their own accounting login to see the figures directly.
ProWorks is not tax-filing software and doesn't submit VAT returns to HMRC - your accountant or VAT software does that. It keeps the invoices and records correct so that step is straightforward.
The VAT domestic reverse charge for building and construction services has been in effect since 1 March 2021. On qualifying work, the subcontractor no longer charges VAT to the contractor. Instead, the contractor receiving the work accounts for that VAT directly to HMRC. It applies to standard and reduced-rate construction services between VAT-registered businesses where the work is reported under the Construction Industry Scheme. Always check GOV.UK or your accountant for how it applies to your own work.
It applies when all of these are true: you and your customer are both VAT-registered, the work is reported under CIS, and the supply is standard or reduced-rated. It does not apply to zero-rated work, to customers who are not VAT-registered, or to supplies to 'end users' and 'intermediary suppliers' who have told you in writing that they are one. An end user is a business that does not make an onward supply of the construction services it receives. If you are unsure, confirm with GOV.UK or your accountant.
Include all the normal information a VAT invoice needs. Make it clear that the domestic reverse charge applies and that the customer must account for the VAT - for example 'Reverse charge: customer to pay the VAT to HMRC', or a reference to VAT Act 1994 Section 55A. Show the VAT rate or amount that applies, but do not add that VAT to the total the customer pays - the customer accounts for it to HMRC.
Yes. ProWorks stores your CIS status and applies CIS reverse-charge VAT on invoices where it applies, so the invoice is produced the right way rather than untangled at year end. ProWorks is not tax-filing software and does not submit VAT returns to HMRC - your accountant or your VAT software does that. It keeps the underlying records correct and clear.
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Read more →What records you must keep, how long for, and how to keep them digital as you work.
Read more →Convert between VAT inclusive and exclusive amounts at 20%, 5% or 0% for UK trades.
Try it free →Let ProWorks apply the reverse charge and keep your records straight, so construction invoices go out correct every time. Try it free for 30 days, no credit card required.
This page is general information, not tax advice - check with your accountant or HMRC about your own situation. Correct as of July 2026; the rules can change, so always confirm the current position on the GOV.UK VAT domestic reverse charge guidance.