How to apply the VAT reverse charge on an invoice

Under the VAT reverse charge you don’t charge VAT on the invoice. You state the rate or the amount that would have applied, leave it out of the total, and add wording making clear the customer accounts for the VAT to HMRC. The invoice must include the reference “reverse charge”, and HMRC accepts wording such as “VAT Act 1994 Section 55A applies”, “S55A VATA 94 applies” or “Customer to pay the VAT to HMRC”. It applies when both of you are VAT registered in the UK, the work is reported under CIS, and your customer is not an end user.

For what the scheme is rather than how to invoice for it, see domestic reverse charge.

When it applies

Three conditions, all of them at once:

the supply is a standard or reduced rate VAT service

both businesses are registered for VAT in the UK

the supply is reported within the Construction Industry Scheme

The list of services matches CIS construction operations: constructing, altering, repairing, extending, demolishing or dismantling buildings; works forming part of the land, including walls, roadworks, power lines, pipelines, sewers and drainage; installing heating, lighting, air-conditioning, ventilation, power, drainage, sanitation, water supply or fire protection; internal cleaning during construction or restoration; painting and decorating inside or out; and the preparation and completion work around it, including site clearance, excavation, foundations, scaffolding, site restoration and landscaping.

When it does not apply

Not on the list, when supplied on their own: drilling or extracting oil and natural gas; extracting minerals and the tunnelling for it; manufacturing building or engineering components, materials, plant or machinery, or delivering them to site; manufacturing components for the systems above; the professional work of architects or surveyors, or building, engineering, interior or exterior decoration and landscape consultants; making, installing and repairing purely artistic works; signwriting and signboards; installing seating, blinds and shutters; and installing security systems, including burglar alarms, CCTV and public address systems.

It also doesn’t apply where your customer isn’t VAT registered. Invoice a private homeowner and you charge VAT the normal way.

Here’s the bit that trips main contractors. Working for a domestic customer does not make you an end user. You’re still making onward supplies of construction services, so your own subcontractors' invoices to you are still reverse charged even though your invoice to the householder carries VAT.

The end user exemption

An end user is a business, or group of businesses, that is VAT and CIS registered but does not make onward supplies of the construction services it receives. The developer or building owner at the top of the chain, in other words.

The exemption only works if it’s claimed. HMRC’s rule is that the reverse charge doesn’t apply to supplies to end users when the end user tells their supplier in writing that they’re an end user. No written notification, no exemption, and you should be reverse charging.

Once you have that notification you don’t need to go chasing their VAT and CIS registration details as well.

There’s a 5% disregard for customers who are basically end users but re-supply a very small proportion, under 5% by value. They can still issue the declaration.

Intermediary suppliers get treated the same way. They’re VAT and CIS registered businesses connected or linked to an end user, either through a relevant interest in the same land, such as landlord and tenant, or by being in the same corporate group under section 1161 of the Companies Act 2006. Again, in writing.

Get those declarations in a folder. When HMRC asks why you didn’t reverse charge a £40,000 invoice, “they told me on the phone” is not the answer you want.

What goes on the invoice

Three requirements:

All the information normally required on a VAT invoice.

A note making clear the domestic reverse charge applies and the customer must account for the VAT.

The VAT that’s due under the reverse charge, clearly stated. If your system can’t show the amount, state the rate instead. Either way, do not include the VAT in the amount charged.

The VAT Regulations 1995 require the invoice to include the reference "reverse charge". HMRC’s own examples of wording that meets the legal requirement:

VAT Act 1994 Section 55A applies

S55A VATA 94 applies

Customer to pay the VAT to HMRC

If your software can’t handle the reverse charge amount, add “customer to account to HMRC” and make sure the customer can tell which items are reverse charged.

Worked example

You’re a subcontractor invoicing a main contractor £5,000 for labour and materials on a commercial fit-out. Both VAT registered, work reported under CIS, and they’ve given you no end user declaration.

Normally you’d add 20% VAT and invoice £6,000. Under the reverse charge you invoice £5,000, and the invoice says: Reverse charge: VAT Act 1994 Section 55A applies. Customer to pay the VAT of £1,000 to HMRC.

They pay you £5,000 and account for the £1,000 themselves.

Worth being clear-eyed about what that does to you. You used to hold that £1,000 until your VAT return was due, and it quietly financed the business in between. It’s gone. If your cash flow assumed VAT collected on the way in, this is the change that hurts, and it hits every reverse-charged invoice.

CIS deductions still work exactly as before on the labour element. The two run alongside each other.

Common mistakes

Charging VAT anyway. If the reverse charge applies, VAT on your invoice is wrong and your customer shouldn’t pay it.

Taking an end user declaration verbally. It has to be in writing, and you need to be able to produce it.

Assuming domestic work makes you an end user. It doesn’t. Your subcontractors still reverse charge you.

Including the VAT in the total. State the amount or the rate, then leave it out of what you’re charging.

Missing the words “reverse charge”. The regulations require the reference. Use one of HMRC’s forms of wording.

Do this in FieldHive

The reverse charge and the CIS deduction land on the same invoice, and doing both by hand is where the errors come from. Build the invoice free in your browser with the reverse charge wording applied and the CIS deduction worked out from the labour and materials split. Check the deduction figure first with the CIS tax calculator.

Aid, not advice

This guide explains how to invoice under the VAT reverse charge. It is not tax advice. Whether a particular supply is in scope, and whether your customer qualifies as an end user, depends on the contract and the chain above you. Check with your accountant or HMRC if a job is not clear cut.

Scope, definitions and invoice wording checked on gov.uk August 2026 against HMRC’s VAT domestic reverse charge technical guide (last updated 18 September 2024) and the reverse charge scope guidance.