VAT Reverse Charge – CIS


From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.

The charge applies to standard and reduced-rate VAT services:

  • for individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

Who will the VAT Reverse Charge effect?

The VAT reverse charge will apply to businesses and individuals who are VAT registered in the UK in the construction industry.

These specified supplies include but are not limited to:

  • Installing ventilation, power supply, heating, lighting, air-conditioning, sanitation, drainage, fire protection systems or water supply in any structure or building
  • Constructing, extending, repairing, altering, dismantling or demolishing structures or buildings (permanent or not), including offshore installation services
  • Extending, altering, constructing, repairing, demolishing of any works forming, or planned to form, part of the land, including roadworks, walls, electronic communications equipment, power lines, railways, inland waterways, aircraft runways, harbours and docks

For the complete list of services affected by the reverse charge, please visit the government’s website.

How does the VAT Reverse Charge work?

As of 1 March 2021, a VAT registered business receiving supplies of construction services from another VAT registered business where the reverse charge applies, will have to account for the reverse charge VAT on its own VAT return and will be able to recover that VAT on the same VAT return, subject to the normal VAT recovery rules. Where the reverse charge applies, a business will need to ensure that it does not pay over the VAT element to the supplier, as it will still be liable to account for the VAT to HMRC.

The reverse charge will apply throughout the supply chain up to the point where the customer receiving the supply is no longer a business that makes supplies of construction services.

Use this flowchart to help you decide if you need to use the reverse charge. The reverse charge will need to be used when:

  • your customer is registered for VAT in the UK
  • payment for the supply is reported within the Construction Industry Scheme (CIS)
  • the services you supply are standard or reduced rated
  • you’re not an employment business supplying either staff or workers, or both
  • your customer has not given written confirmation that they’re an end user or intermediary supplier.

Use this flowchart to see how you would decide whether to apply normal VAT rules,
or apply the domestic reverse charge.

Is the transaction within the scope of CIS?

Normal VAT Rules Apply

Is the supply standard or reduced rated?

Normal VAT Rules Apply

Is your Customer VAT Registered?

Normal VAT Rules Apply

Is your customer registered for CIS?

Normal VAT Rules Apply

Is the Customer the end user of the product?

Normal VAT Rules Apply

Domestic Reverse Charge Applies

Share this Story