Question 1

What is the VAT domestic reverse charge for construction services?

Accepted Answer

It is an anti-fraud measure that shifts the responsibility for accounting for VAT from the subcontractor (supplier) to the contractor (customer). Instead of the subcontractor charging VAT and paying it to HMRC, the contractor records the VAT on their own VAT return as both output tax and input tax — usually netting to nil. It has applied to most CIS-applicable construction services in the UK since 1 March 2021.

Question 2

When does the VAT reverse charge apply?

Accepted Answer

It applies when all of the following are true: both parties are VAT-registered in the UK, the supply is a CIS-applicable construction service at the standard or reduced rate, and the customer is not an end user. If any of these are missing, normal VAT rules apply and the subcontractor charges VAT in the usual way.

Question 3

What is an "end user" and why does it matter?

Accepted Answer

An end user is a customer that uses the construction services for themselves rather than selling them on as part of further construction supplies — for example, a property owner having work done on their own premises, or a developer selling completed properties. End users must give written notification of their status; once notified, the reverse charge does not apply and the subcontractor charges VAT normally.

Question 4

How do I invoice under the VAT reverse charge?

Accepted Answer

The invoice should show the net amount, no VAT charged, and a clear statement that the reverse charge applies — for example, "Reverse charge: customer to pay the VAT to HMRC". Most contractors also show the VAT rate and the VAT that would have been charged so the customer can record it on their return.

Question 5

How does the reverse charge interact with CIS?

Accepted Answer

The two are separate but overlap. CIS is income tax deducted from the labour element of subcontractor payments; the reverse charge is about who accounts for VAT. Both apply to most construction services between VAT-registered, CIS-registered businesses in the UK. The reverse charge follows the CIS scope of "construction operations" — if a service is in scope for CIS, it is in scope for the reverse charge (unless the customer is an end user or one of the other exceptions applies).

Question 6

How does the reverse charge affect cash flow for subcontractors?

Accepted Answer

Subcontractors no longer hold customer VAT between collecting it and paying it to HMRC, which removes a short-term cash buffer many businesses relied on. The mitigation is to invoice promptly, move to monthly VAT returns if reclaims build up (the calculator can flag this), and tighten payment terms with contractors.

Question 7

Does this calculator store the figures I enter?

Accepted Answer

No. Every figure stays in your browser. Inputs are never sent to a server, never logged, and clearing the page wipes them. Use it freely without worrying about commercial data leaking.

VAT Reverse Charge Calculator

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