The VAT domestic reverse charge for construction, explained

If you’re a subcontractor in the building trades, the VAT domestic reverse charge changed how you invoice. It’s not new any more, but it still trips people up — and getting it wrong means awkward conversations with your accountant. Here’s the short version.

What the reverse charge is

For most building and construction services supplied between VAT-registered businesses that are reported under CIS, the customer accounts for the VAT to HMRC — not you. So instead of charging VAT and passing it on, you leave it off the invoice and state that the reverse charge applies.

What your invoice has to show

• That the domestic reverse charge applies and the customer must account for the VAT.
• The VAT rate that would have applied (usually 20% or 5%), even though you’re not charging it.
• The net amount, so the customer knows how much VAT to account for.

When it does and doesn’t apply

It applies where both parties are VAT-registered, the work is a CIS-reportable construction service, and the customer isn’t an ‘end user’ (e.g. the building’s owner-occupier). If your customer is an end user, you charge VAT normally — so you need to know which is which per job.

How software helps

This is exactly the kind of rule that’s easy to get wrong by hand and easy to automate. In Worksum, you flag an invoice as reverse-charge and it applies the correct treatment and wording, alongside CIS deductions on labour and any retention — turning a finished job into a compliant invoice in one click. Your customer sees a clear breakdown, and so does your accountant.

None of this is tax advice — check your own circumstances with your accountant or HMRC — but the mechanics are well suited to being handled by your job-management system rather than a spreadsheet.