VAT: Domestic reverse charge for building and construction services

The domestic reverse charge for building and construction services comes into effect on 1 October 2020 and is a major change to the way VAT is collected in the building and construction industry.

The change means the customer receiving the specified construction service will have to pay the VAT due to H M Revenue and Customs and not the supplier.

This will affect you if you are registered for VAT and supply or receive specific services that are reported under the Construction Industry Scheme (CIS).

You will need to check whether your customers are VAT and CIS registered, or an end user.

When supplying a service subject to the VAT domestic reverse charge, suppliers must:

  • Show all information required on a VAT invoice.
  • Make a clear note on the invoice that the domestic reverse charge applies.
  • Clearly state how much VAT is due under the reverse charge.
  • The VAT should not be included in the amount charged to the customer.

Any VAT paid to H M Revenue and Customs by the customer can be reclaimed, subject to the normal rules for VAT recovery.

The reverse charge does not apply to consumers or final customers of building and construction services and instead the normal VAT rules will apply.

A flowchart has been published by HMRC to help you decide which rules to apply and this can be found here.

Should you want to discuss how we may be able to help your business then do contact us on 01244 400244.

This update was published in February 2020 based on information available at the time. Shaw Austin, your local Chartered Accountants, support business throughout Chester, North Wales, Merseyside, Manchester and the UK.