My Job Goblin

VAT

How to get a VAT reverse charge invoice right

You are VAT registered, the job is for another firm rather than a householder, and you are about to send the invoice. Do you add the VAT or not? Get it wrong in one direction and you have handed over money nobody asked you for. Get it wrong in the other and you have collected tax you were not entitled to collect.

For VAT-registered subcontractors · Checked against HMRC guidance on 23 August 2026 · About 7 minutes

The question is not what you are doing, it is who you are billing

The domestic reverse charge has applied to construction since 1 March 2021, and it still catches people out because it is not a rule about the work. Fitting the same bathroom does not change. What changes is who is paying for it.

Invoice a householder and nothing is different from how it has always been: you charge VAT, you collect it, you hand it to HMRC on your return. Invoice another VAT-registered construction business further up the chain and, in most cases, you charge no VAT at all. They account for it at their end instead. The tax still gets paid, it just stops moving through your bank account on the way.

Five things that must all be true

All five of these have to hold at the same time. If every one is true you apply the reverse charge. If any one of them fails, you invoice VAT the ordinary way.

  • Your customer is registered for VAT in the UK
  • The services you are supplying fall within the scope of the Construction Industry Scheme
  • The services are standard rated or reduced rated
  • You are not an employment business simply supplying workers
  • Your customer has NOT given you written confirmation that they are an end user or an intermediary supplier

The first one does most of the work in practice. HMRC's technical guide is blunt about it: reverse charge accounting cannot apply where the customer is not VAT registered. That single line takes every domestic job you will ever do out of scope.

If they say nothing, you charge no VAT

This is the part that feels wrong the first time, and it is the part worth getting into your head properly, because the instinct is exactly backwards.

An end user is a VAT and CIS registered business that does not make onward supplies of the construction services it receives. In plain terms, the one the building is actually for. An intermediary supplier is a business connected or linked to an end user that buys the services and passes them on without material changes. Supplies to either are outside the reverse charge and get VAT as normal.

So the default runs the way you would not expect. Saying nothing does not mean you add VAT to be safe. Saying nothing means the reverse charge applies and you leave the VAT off. The declaration is what switches VAT back on, not what switches it off.

Better still, the written declaration is your protection rather than theirs. If a customer wrongly claims to be an end user, HMRC's position is that "the customer will be liable for accounting for the VAT that should have been charged under the reverse charge". Get it in writing, keep it with the job, and the risk sits with the person who made the claim. A verbal assurance on site protects nobody.

Asking a new contractor to confirm their status

Hi [name],

Before I invoice, could you confirm in writing whether you are an end user or intermediary supplier for this contract, for VAT purposes?

If you are, I will invoice with VAT as normal. If you are not, or I do not hear back, the domestic reverse charge applies and the invoice will show no VAT for you to account for at your end.

A reply to this message is fine, I just need it in writing for the file.

Thanks, [your name]

What has to be on the invoice

A reverse charge invoice is not just a normal invoice with the VAT line deleted. It has to tell the customer that the charge applies and that accounting for the VAT is now their job.

HMRC's own suggested wording, any one of which will do:

Acceptable reverse charge wording

VAT Act 1994 Section 55A applies

S55A VATA 94 applies

Customer to pay the VAT to HMRC

You must also show how much VAT is due under the reverse charge, or state the rate if you cannot show the amount. What you must not do is add it to the total. The customer pays you the net figure and settles the VAT with HMRC directly.

The same £2,000 job invoiced two ways
Normal VAT invoiceReverse charge invoice
Work done£2,000£2,000
VAT at 20%£400£400, shown for information only
Total the customer pays you£2,400£2,000
Who pays HMRC the £400You do, on your returnThey do, on theirs
Wording neededYour VAT number and the rateAlso a statement that S55A applies

The 5% rule is a contract rule, not an invoice rule

There is a relief for contracts where only a sliver of the work is caught by the reverse charge, and it is the single most misapplied part of the rules.

If the reverse charge element is 5% or less of the whole supply value, it can be disregarded and the lot treated normally. But it is a judgement made once, about the contract, not a sum you redo every month.

So an invoice that happens to be 4% reverse charge work does not qualify on its own. If you did not agree the treatment at the outset against the contract as a whole, the disregard is not available to you. It also does not apply where there is a single supply whose predominant element is zero-rated.

Zero-rated work is a different thing entirely

New build housing is generally zero-rated, and a lot of subcontractors assume that zero-rated and reverse charge are two ways of describing the same "no VAT on the invoice" outcome. They are not, and conflating them produces the wrong paperwork.

The reverse charge only applies to standard-rated and reduced-rated supplies. Zero-rated work is simply zero-rated: there is no VAT because the rate is nought, not because someone else is accounting for it. HMRC states that the reverse charge does not apply to standard-rated items included in a zero-rated supply of building and construction services.

It will dent your cash flow, and that is fixable

Here is the part nobody warns you about until it has already happened. If you used to charge VAT on your invoices, that money sat in your account between collecting it and paying it over. It was never yours, but it was there, and a lot of small businesses were quietly running on it.

Under the reverse charge you never receive it at all, while you carry on paying VAT on your own materials. For a subcontractor whose customers are nearly all contractors, that usually flips the return from a payment to a refund.

The work this never applies to

Some services are outside the reverse charge when they are supplied on their own, even between two VAT-registered construction businesses. Supplied as part of a larger job they can be swept back in, so the test is whether the service stands alone.

  • Drilling for oil or natural gas, and extracting minerals
  • Manufacturing building components, materials, plant or machinery
  • Professional work by architects and surveyors, and consultancy of that kind
  • Installing seating, blinds and shutters
  • Installing security systems, including alarms, CCTV and public address systems
  • Signwriting and erecting signboards
  • Making, installing and repairing artwork such as sculptures and murals

Employment businesses are the other common exclusion. If what you are really supplying is people rather than construction services, you charge VAT in the normal way whatever the site looks like.

Most of this is a question about the customer, so record it once

Nothing above changes from job to job. It changes from customer to customer: are they VAT registered, is the work within CIS, have they sent you an end user declaration. My Job Goblin keeps your contacts, your quotes and your invoices in one place, so the answer lives with the customer rather than being reconstructed from memory every time you raise an invoice.

Start free, no card neededHow to check a CIS deduction

This is general information about how the VAT domestic reverse charge for building and construction services works, checked against HMRC's published guidance and technical guide on 23 August 2026. It is not tax advice and cannot take account of your own contracts or circumstances. VAT treatment of a specific supply can turn on details not covered here, so check with your accountant or HMRC if you are unsure.

Frequently asked questions

When does the VAT domestic reverse charge apply?

Five things have to be true at once. Your customer is registered for VAT in the UK, the services are within the scope of the Construction Industry Scheme, the services are standard or reduced rated, you are not an employment business simply supplying staff, and your customer has not given you written confirmation that they are an end user or an intermediary supplier. If all five hold, you charge no VAT and your customer accounts for it themselves. Miss any one and you invoice VAT as normal.

Do I charge VAT to a private customer under the reverse charge?

No, the reverse charge does not touch domestic work. A householder is not VAT registered, and HMRC's technical guide is explicit that reverse charge accounting cannot apply where the customer is not VAT registered. So a private job is invoiced exactly as it always was: you charge VAT at the appropriate rate and you account for it. The reverse charge only exists inside the construction supply chain, between VAT-registered businesses.

What if my customer does not tell me whether they are an end user?

Then you apply the reverse charge. HMRC puts it plainly: if they do not confirm their end user status in writing and the supplies meet the conditions, you must account for VAT using the reverse charge. Silence is not a reason to add VAT to the invoice, it is the default that removes it. This is the part that feels backwards the first time, because doing nothing means charging less rather than more.

What wording do I need on a reverse charge invoice?

The invoice must make clear that the reverse charge applies and that the customer is the one who has to account for the VAT. HMRC's suggested wording includes 'VAT Act 1994 Section 55A applies', 'S55A VATA 94 applies' and 'Customer to pay the VAT to HMRC'. You must also show how much VAT is due under the reverse charge, or if you cannot show the amount, state the rate, but you do not add that VAT to the total the customer pays you.

What happens if my customer wrongly says they are an end user?

The liability lands on them, not on you. HMRC's technical guide states that if a written notification is not made correctly, the customer will be liable for accounting for the VAT that should have been charged under the reverse charge. That is the reason to insist on the declaration in writing and to keep it: the written statement is what moves the risk off your invoice. A verbal assurance on site protects nobody.

How does the 5% disregard work?

If the reverse charge part of a supply is 5% or less of the whole value, it can be disregarded and the whole supply treated normally. The catch is that it is agreed at contract level, not worked out invoice by invoice. HMRC says the disregard only applies where both parties agree from the start of the contract that it should apply, on the basis of overall contract values, and that the 5% should not be calculated on an invoice by invoice basis. It also does not apply where there is a single supply whose predominant element is zero-rated.

Why has my VAT return turned into a refund since the reverse charge started?

Because you are no longer collecting VAT on your sales while still paying it on your materials, so the balance tips the other way. HMRC expects this: the reverse charge may mean your business makes net repayment claims, as you will not receive VAT on payments from your customers. If that is now your normal position, you can apply to move to monthly VAT returns through your online VAT account, which gets the money back to you roughly three times as often.