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VAT: reverse charge for building and construction services

The VAT reverse charge for building and construction services comes into effect from 1 October 2019. The reverse charge represents part of a government clamp-down on VAT fraud.

A reverse charge means that a contractor receiving a supply of construction services must account for the output VAT due, rather than the sub-contractor who supplied the services. The contractor also deducts the VAT due on the supply as input VAT, subject to normal VAT rules, meaning no net tax is usually payable to HMRC. The reverse charge thus removes the scope to evade any VAT owing to HMRC by the sub-contractor.

The charge affects only supplies at standard or reduced rates where payments are required to be reported via the Construction Industry Scheme (CIS). It does not apply:

  • to zero-rated supplies
  • to services supplied to ‘end users’ or ‘intermediary suppliers’.

End users and intermediary suppliers

The reverse charge does not apply to consumers or final customers of building and construction services. Any consumers or final customers who are registered for VAT and CIS will need to ensure their suppliers do not apply the reverse charge on services supplied to them.

For reverse charge purposes consumers and final customers are called end users. They are businesses, or groups of businesses, that do not make onward supplies of the building and construction services in question, but they are registered for CIS as mainstream or deemed contractors because they carry out construction operations, or because the value of their purchases of building and construction services exceeds the threshold for CIS.

Intermediary suppliers are VAT-registered businesses in receipt of CIS supplies who are connected or linked to end users. Examples could be landlords and tenants, or recharges of building and construction services within a group of companies.

Businesses will need to know when they are dealing with an end user or intermediary supplier, so that they can invoice appropriately. The end user or intermediary supplier should inform the supplier of their status so that VAT can be charged as normal. If the end user does not provide confirmation of status, the supplier should issue a reverse charge invoice.

How it works

Please see our useful simple PDF guide VAT Reverse Charge

HMRC Policy

HMRC has now issued technical guidance https s://

There will be a ‘light touch’ on genuine errors for six months from October, where businesses are aiming to comply and act in good faith. Businesses knowingly claiming end user status when the reverse charge should have applied, however, will be liable for the tax due, and may be liable for penalties.

Planning for the new regime

Key action points:

  • establish when the reverse charge is likely to apply
Q1 Are any of the supplies you are making within the scope of CIS No
Normal VAT rules apply
Q2 Is the supply standard or reduced rated No
Normal VAT rules apply
Q3 Is your customer VAT registered No
Normal VAT rules apply
Q4 Has your customer provided confirmation that they are an end user No
VAT reverse charge applies
Normal VAT rules apply
  • check that your accounting systems will calculate and report reverse charge supplies. Invoices will need to specify that the reverse charge applies
  • estimate the cash flow consequences on your business if you no longer hold output tax. It may be that changing to a monthly VAT return cycle to accelerate payments due from HMRC would be of benefit.

If you are a supplier using the Cash Accounting Scheme or the Flat Rate Scheme, neither of these schemes can be used for the supply of services that are subject to the reverse charge. This may mean that it is no longer beneficial to use these schemes.

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