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CIS Domestic Reverse Charge · In force since 1 March 2021

Do I charge VAT on this invoice?

Five questions per HMRC VAT Notice 735. No data leaves the tab.

In this section

Tools

Decision flow

Q1

Is the supplier (you, the contractor issuing the invoice) VAT-registered?

How the rule actually works

Three changes vs ordinary VAT.

No VAT on the invoice. The supplier issues the invoice without charging VAT. The invoice must show the VAT rate that would have applied and include the wording "Reverse charge: VAT Act 1994 Section 55A applies. Customer to account for VAT to HMRC." The supplier's cash position changes — no longer collecting VAT from the customer, often shifting from a payable to a refundable VAT position. Many subcontractors switch from quarterly to monthly VAT returns to bring repayments forward.

Customer self-accounts. The customer puts the VAT amount in Box 1 (output VAT) AND Box 4 (input VAT) on its own return — both sides, net cash effect zero. The net value goes in Box 7 (purchases). The supplier puts only the net in Box 6 (sales) and nothing in Box 1.

Two exits: end-user, intermediary. If the customer confirms in writing that it's an end-user (building for itself) or intermediary (same group as an end-user, on-supplying), the rule does not apply and you charge VAT as normal. The confirmation must be written — verbal assumptions don't survive HMRC inspection. Keep the confirmation on file for 6 years.

Authoritative source: HMRC VAT Notice 735 (gov.uk). This tool reproduces the §3-§7 decision logic but is not legal advice — if your case is unusual, consult an accountant.

FAQ

CIS reverse charge — common questions

What is the CIS Domestic Reverse Charge?
The CIS Domestic Reverse Charge is a UK VAT accounting rule that has applied to most supplies of construction services between VAT-registered businesses since 1 March 2021. When it applies, the supplier issues an invoice without VAT and the customer accounts for the VAT on their own VAT return (as both input and output VAT — usually net-zero cash effect). The mechanism is set out in HMRC VAT Notice 735 and was introduced to combat missing-trader fraud in the construction sector.
When does the CIS reverse charge apply?
All of the following must be true: (1) the supplier is VAT-registered; (2) the customer is VAT-registered; (3) the supply is a construction operation within the Construction Industry Scheme (Regulation 2 of the CIS Regulations); (4) the customer has NOT confirmed it is an end-user; (5) the customer has NOT confirmed it is an intermediary. If any single one of these is missing, the reverse charge does not apply and the supplier charges VAT in the normal way.
Who is an "end-user" for CIS reverse-charge purposes?
An end-user is a VAT- and CIS-registered business that receives construction services for its own purposes and does not make any onward supply of those services. Common examples: a property developer building for themselves, a retailer fitting out their own shop, or a homeowner who happens to be VAT-registered. The customer must give the supplier WRITTEN confirmation of end-user status — the supplier cannot assume it. If end-user status is confirmed, the supplier charges VAT as normal.
Who is an "intermediary" for CIS reverse-charge purposes?
An intermediary is a VAT- and CIS-registered business that is in the same corporate group, undivided beneficial ownership, or VAT group as an end-user and is supplying construction services TO that end-user, not on-supplying them. The intermediary exception was added so that group structures owning the end-user property are treated the same as the end-user itself. Like end-user status, the customer must provide written confirmation.
What goes on the invoice when the reverse charge applies?
Issue the invoice without charging any VAT. Show the VAT rate that would have applied (typically 20% or 5%) and state clearly: "Reverse charge: VAT Act 1994 Section 55A applies. Customer to account for VAT to HMRC." Some accounting software uses the shorter "Reverse charge: customer to account for VAT to HMRC". Show the VAT amount on the customer's self-account, not the net charge. Keep the supply OUT of Box 1 (output VAT) on your VAT return and put the NET value in Box 6 (sales).

References

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