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Construction Industry – Domestic Reverse Charge VAT

The domestic reverse charge is a major change to the way VAT is collected in the building and construction industry. It will come into effect on 1 March 2021 and has been bought in to prevent missing trader fraud.  The customer receiving the service will pay the VAT due to HMRC rather than paying the supplier.

The reverse charge will apply to you if:

  • You are VAT registered
  • The services you supply are standard or reduced VAT
  • The supply is with the scope of the Construction Industry Scheme
  • Will apply to both labour & materials

It will not apply if:

  • The services are supplied to an end user
  • The supplies are zero rated

We understand this is a major change, so we recommend that you:

  • Check if your customer has a valid VAT no
  • Check your customer CIS registration
  • Review your contracts to decide if the reverse charge will apply and advise your customers
  • Ask you customer to confirm whether they are an end user or intermediary supply
  • Make sure your accounting system can account for the reverse charge
  • Consider whether the change will have an impact on your cash-flow
  • Update your invoice to reflect the reverse charge

Details of which construction services the reverse charge applies to can be found here

​We are here to help you make this transition easier. Just give Helen a call on 07730621977.

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