The VAT reverse charge for construction: when to use it and what to put on the invoice

When it applies

Since 1 March 2021, for construction services that would be standard or reduced rate VAT, when all of these are true:

• You and your customer are both VAT registered
• The work is reported under CIS
• Your customer isn't the end user or an intermediary

When it doesn't

• Work for homeowners and other private customers: charge VAT as normal
• Work for an end user, such as a business having its own premises fitted out, that confirms it in writing
• Work for an intermediary, such as a landlord or a connected company, that confirms it in writing
• Zero-rated work, such as building a new home
• Where the reverse charge work is 5% or less of the invoice's value: charge VAT normally on the whole invoice

What the invoice must show

• Everything a normal VAT invoice shows
• The VAT rate and the amount of VAT that would have been charged, but not added to the total
• Wording such as "Reverse charge: customer to pay the VAT to HMRC"
• The total you want paid, without the VAT

On your VAT return

As the supplier, put the net value in box 6 but no VAT in box 1. The customer accounts for the VAT on their own return and reclaims it, so no money changes hands.

Watch your cash flow

Because you no longer collect VAT from your contractor customers, you may find you're due a VAT repayment each quarter on your materials. Some subcontractors switch to monthly VAT returns to get it back sooner.