Domestic reverse charge

In practice for trades

Since 1 March 2021, a VAT-registered subcontractor doing CIS-covered work for another VAT-registered business that is not an end user does not add VAT to the invoice. The invoice notes that the domestic reverse charge applies and states the VAT the customer must account for. The customer pays the net figure and handles the VAT on their own return. The rule exists to stop missing-trader fraud, where a supplier charged VAT and disappeared before paying it to HMRC.

The word "domestic" causes more confusion than the rule itself. It means UK-domestic, not householders. Work for a private customer is outside the charge because that customer is not VAT registered, so you charge VAT as normal.

Two tests decide it. The work must be reported under CIS, and the customer must be VAT registered and not an end user. HMRC defines an end user as a VAT and CIS registered business that makes no onward supply of the construction services it receives.

Correct as at August 2026, per HMRC's VAT reverse charge technical guide on gov.uk. This is an aid, not tax advice. Check your position with your accountant or HMRC.

Worked example

You invoice a main contractor £2,000 for electrical work on a CIS job. The invoice shows £2,000 net, VAT £0, with the note: "Domestic reverse charge: customer to account for VAT to HMRC at 20% (£400)." They pay you £2,000 and declare the £400 themselves.