Select Page

construction site

Basic Principles


  • Applies to businesses buying and selling construction services who are both registered for VAT and CIS
  • Comes into effect from 1 March 2021
  • Applies to construction services where payments are reported through CIS up to the point where the customer receiving the supply is no longer a business that makes supplies of those services
  • Only applies to reduced rate (5%) and standard rated (20%) services. Not Zero-rated supplies
  • Applies on business to business (B2B) basis where the recipient makes an onward supply
  • The reverse charge doesn’t apply when the supply consists only of materials. There must be an element of labour involved, but then the reverse charge extends to the whole invoice, including the cost of materials provided
  • The business making the supply must make it clear on the sales invoice that the customer must make a reverse charge entry, ideally specifying the amount of VAT or at least the rate that applies to the work

The reverse charge will not apply where:

  • Services are supplied to the end user
  • The recipient makes onward supplies of those construction services to a connected company, or
  • The supplier and recipient are landlord and tenant or vice versa
  • Contractors will have to disclose to their sub-contractors if they are at the end of the supply chain (end user) so VAT can be charged by the sub-contractor
  • If contractor does not disclose to the sub-contractor that they are an end user the contractor will have to declare the reverse charge
  • If a business is on a cash accounting scheme there is a potential cash flow hit form 1 March 2021.
  • Please see attached flowchart to help you decide whether to apply normal VAT rules, or apply the domestic reverse charge

VAT: domestic reverse charge for building and construction services

Please use the flowchart to see how you would decide whether to apply normal VAT rules or apply the domestic reverse charge. Do not use if for services supplied by employment businesses.

In order to view the flowchart, please click the ‘Click Here’ button.

If you need any advice or help please contact Robert Perrin, Tax Manager at Bevan Buckland LLP on 01792 484559. Alternatively, email