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VAT domestic reverse charge for building and construction services

The government has published a final version of the draft legislation, in the form of a statutory instrument, which will introduce a VAT domestic reverse charge for building and construction services with effect from 1 October 2019. 

Supplies that will be affected

The domestic reverse charge will only affect supplies at the standard or reduced rates where payments are required to be reported through the Construction Industry Scheme (CIS).

Therefore supplies between sub-contractors and contractors, as defined by CIS, will be subject to the reverse charge unless they are supplied to a contractor who is an end user.

End users will usually be recipients who use the building or construction services for themselves, rather than sell the services on as part of their business of providing building or construction services.

The legislation also allows for those connected to end users, including landlords or tenants, to also be treated as end users. Therefore intra-group and leasing re-charges of building and construction services connected to the end user are also excluded from the reverse charge.

How a domestic reverse charge operates

A domestic reverse charge means that the customer receiving the supply of specified construction services must account for the VAT due rather than the supplier. In turn, the customer deducts the VAT due on the supply as an input, meaning no net tax is payable to HMRC. This removes the scope to evade any VAT owing to HMRC.

The UK has introduced similar measures in response to criminal threats for mobile telephones, emissions allowances, gas, electricity and electronic communications. A domestic reverse charge only applies to supplies between UK taxable persons therefore unless the customer is registered or liable to be registered for VAT it will not apply.

Timing and scope

The domestic reverse charge will take effect from 1 October 2019. Because it only applies to supplies where payments are reported through CIS the supplies affected are closely aligned to those defined as construction operations under CIS.

It applies to the following building and construction services at either standard or reduced rate VAT:

  • construction, alteration, repair, extension, demolition or dismantling of buildings or structures (whether permanent or not), including offshore installations
  • construction, alteration, repair, extension or demolition of any works forming, or to form, part of the land, including (in particular) walls, roadworks, power-lines, electronic communications apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
  • installation in any building or structure of systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
  • painting or decorating the internal or external surfaces of any building or structure

It also applies to services which form an integral part of, or are preparatory to, or are for rendering complete, the services described in the bullet points above including site clearance, earth-moving excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works. 


Supplies of the following supplies are not covered by the domestic reverse charge if supplied on their own:

  • drilling for, or extraction of, oil or natural gas
  • extraction (whether by underground or surface working) of minerals and tunnelling or boring, or construction of underground works, for this purpose
  • manufacture of building or engineering components or equipment, materials, plant or machinery, or delivery of any of these things to site
  • manufacture of components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or delivery of any of these things to site
  • the professional work of architects or surveyors, or of consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape
  • the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature
  • sign writing and erecting, installing and repairing signboards and advertisements
  • the installation of seating, blinds and shutters
  • the installation of security systems, including burglar alarms, closed circuit television and public address systems

This list is not exhaustive and if these or any other non-reverse charge supplies are supplied with supplies subject to the domestic reverse charge please refer to the mixed supplies section below.

End users

End users are those who receive building and construction services but do not supply those services on along with other building and construction services. Under CIS rules, they are required to report their payments to HMRC because they are ‘deemed contractors’, either because they are named in the legislation or because of the amount of purchases of building and construction services they make.

Payments by deemed contractors can be excepted from reporting through CIS, in which case the domestic reverse charge will not apply and the supplier should be advised of this.

The effectiveness of the reverse charge does not depend on supplies to end users being included. However, because suppliers may be unaware they are supplying an end user, it will be up to the end user to make the supplier aware that they are an end user and that VAT should be charged in the normal way instead of being reverse charged. This should be in a written form that is clearly understood and can be retained for future reference.

If the end user does not provide its supplier with confirmation of its end user status it will still be responsible for accounting for the reverse charge.

Completion of the VAT Return


Suppliers of goods or services under the domestic reverse charge must not enter in box 1 of the VAT Return any output tax on sales to which the domestic reverse charge applies, but must enter the value of such sales in box 6.


Customers must enter in box 1 of the VAT Return the output tax on purchases to which the domestic reverse charge applies, but must not enter the value of such purchases in box 6. They may reclaim the input tax on their domestic reverse charge purchases in box 4 of the VAT Return and include the value of the purchases in box 7, in the normal way.

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