VAT Reverse Charge for Construction: A UK Contractor’s Invoice Checklist

For many construction invoices, the supplier does not collect VAT: the customer accounts for it instead. That is the domestic VAT reverse charge for building and construction services, in place since 1 March 2021. It is not a general rule for every contractor or every invoice mentioning CIS.

This guide focuses on invoice treatment, not the employment-status questions in our IR35 guide.

Check the transaction before raising the invoice

The reverse charge generally applies to specified standard- or reduced-rated construction services within the Construction Industry Scheme, supplied between UK VAT-registered businesses, where the customer makes onward supplies of the construction services and no exception applies.

Use HMRC’s decision guidance to check:

Is the service within the relevant construction scope?
Is the supply standard- or reduced-rated, rather than zero-rated?
Are both businesses VAT registered?
Is the payment reportable under CIS?
Is the customer making onward supplies of the relevant services?
Has the customer provided an applicable end-user or intermediary-supplier notification?

Confirm the evidence and retain it with the contract. A customer’s trading name or job title is not enough to establish VAT treatment.

End users are an important exception

An end user consumes the construction service rather than selling it on as part of an onward construction supply. HMRC’s rules require the relevant notification to the supplier for end-user treatment. Do not assume that a property owner automatically qualifies, or that silence is a notification.

Intermediary-supplier rules can also apply in particular connected-business situations. Ask for advice if the supply chain is unclear.

What does the supplier put on the invoice?

Where the reverse charge applies, the supplier does not add VAT to the amount the customer pays. The invoice must clearly state that the reverse charge applies and show the relevant VAT information required by HMRC.

For an illustrative £1,000 service normally subject to 20% VAT, the invoice might identify £200 as reverse-charge VAT without adding it to the £1,000 payment. Do not describe this as a VAT-exempt sale. CIS deductions, where applicable, are a separate calculation; the reverse charge does not abolish CIS obligations.

What does the customer report?

The customer generally accounts for output VAT in box 1 of its VAT return and claims input VAT in box 4, subject to normal recovery rules. The supplier generally includes the net sale in box 6, not output VAT in box 1; the customer includes the net purchase in box 7.

The tax may cancel out for a customer with full recovery, but the reporting is still required. Partial exemption or restricted recovery can change the result.

Common mistakes to avoid

Applying reverse charge just because a business is CIS registered.
Confusing a labour-only subcontractor with an employment business supplying workers.
Ignoring the VAT rate, excluded services or a mixed contract.
Applying cash accounting to a transaction that must follow reverse-charge rules.
Using an end-user exception without retaining the notification.

Mixed supplies and minor elements have detailed rules. HMRC’s limited 5% disregard is not a general invoice-by-invoice permission to ignore reverse charge.

Keep bookkeeping aligned

Set up the correct software VAT codes, reconcile CIS deductions separately, and review the first return after changing invoice treatment. See our bookkeeping software comparison or request a bookkeeping quote.

Official guidance

October 2026 edition. Construction VAT can depend on the exact contract: confirm uncertain cases before invoicing.