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The VAT reverse charge for construction, explained

Updated 1 October 2026 · UK rules · Not tax advice: check anything unusual with your accountant.

Since 1 March 2021, many VAT-registered subcontractors in construction don't charge VAT to the contractor. The contractor pays it to HMRC instead. That's the domestic reverse charge.

Does it apply to you? Four questions

Question	If yes…
1. Are you VAT registered?	Keep going. If not, there's no VAT to reverse.
2. Is the customer VAT registered and CIS registered?	Keep going. Homeowners and most non-construction businesses aren't, so you charge VAT normally.
3. Is the work a CIS construction service at 20% or 5%?	Keep going. Zero-rated work isn't affected.
4. Has the customer told you they're an end user or intermediary?	If they have, charge VAT normally. If not, the reverse charge applies.

Worked example

A VAT-registered electrician does £3,000.00 of work for a VAT and CIS-registered builder on a house refurbishment:

Work (net)	£3,000.00
VAT at 20% (reverse charge, not added)	(£600.00)
Total payable to the electrician	£3,000.00

The builder then accounts for the £600.00 VAT on their own VAT return. If CIS also applies, the builder deducts CIS from the labour part of the £3,000.00. See how to show CIS on an invoice.

What to put on the invoice

The usual VAT invoice details, plus the VAT rate and amount for each line.
A clear statement that the reverse charge applies, for example “Reverse charge: VAT Act 1994 Section 55A applies. Customer to pay the VAT to HMRC.”
A total that doesn't include the reverse-charged VAT.

End users and the 5% disregard

An end user is a business that receives the work and doesn't sell it on as construction services, such as a landlord or a shop fitting out its own premises. If they tell you in writing, you charge VAT normally. The 5% disregard lets both sides ignore the reverse charge if the reverse-chargeable services are 5% or less of the contract value.

BrewQuote works out whether the reverse charge applies from your VAT status and the customer type, adds the wording, shows the VAT without adding it, and has a switch for the 5% disregard. You can try the sums in the free CIS and VAT calculator.

Frequently asked questions

When does the construction reverse charge apply?

When a VAT-registered subcontractor supplies standard or reduced-rated construction services to a VAT-registered contractor who is also registered for CIS and is not the end user.

What wording do I put on a reverse charge invoice?

Make it clear the reverse charge applies and the customer must account for the VAT, for example: “Reverse charge: VAT Act 1994 Section 55A applies. Customer to pay the VAT to HMRC.” Show the VAT amount and rate, but don't add it to the total.

Does the reverse charge apply to work for homeowners?

No. Homeowners aren't VAT and CIS registered businesses, so you charge VAT in the normal way.

What is the 5% disregard?

If reverse-charge services are 5% or less of a contract's value, both sides can agree to treat the whole contract normally, without the reverse charge.