VAT
The domestic reverse charge shifts VAT accounting to the customer on CIS construction services between VAT registered businesses.
Written and reviewed by Waqas Sagar Member of ICAEW, Fellow of ACCA, Fellow of AAT, a double graduate and entrepreneur at heart, helping startups grow and serving thousands of businesses nationwide with an excellent team. Published by LimitedCompany.Accountants, 12 London Road, Morden, London SM4 5BQ. Reviewed 12 September 2026 against 2026/27 UK rates and current Companies House and HMRC guidance.
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Xero Gold PartnerCertified advisor
QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnityThe domestic reverse charge applies to most construction services between VAT registered businesses within the Construction Industry Scheme. The supplier does not charge VAT; the customer accounts for both output and input VAT on its own return.
When it applies
Invoicing and cash flow
The domestic reverse charge applies to most construction services between VAT registered businesses within the Construction Industry Scheme. The supplier does not charge VAT; the customer accounts for both output and input VAT on its own return.
Both parties must be VAT registered, the supply must be reportable under CIS, and the customer must not be an end user or intermediary supplier. If the customer is the end user, for example a property owner having work done, normal VAT applies and they must tell you in writing.
Materials supplied with the services fall under the reverse charge too. Supplies of staff or workers alone do not, and zero rated construction work stays zero rated.
The invoice shows the VAT rate that would apply and states that the customer must account for the VAT under the reverse charge. You do not include the VAT in the amount charged.
Subcontractors lose the cash flow benefit of holding VAT until the quarterly return, and many move into a repayment position. Switching to monthly returns speeds up the refunds and is usually worth doing straight away.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK position and current Companies House and HMRC guidance. Check GOV.UK, or ask us, before relying on them for your own company.
Local help
We work with company directors across London and Surrey from our office at 12 London Road, Morden, London SM4 5BQ. Pick your area, or send the form below and we will call you back.
Frequently asked
Poorly. Reverse charge sales are excluded from flat rate turnover, so most affected businesses leave the scheme.
Ask for written confirmation. Without it, apply the reverse charge.
No. Private customers are not VAT registered, so normal VAT applies.
Keep bank statements, sales and platform reports, purchase invoices, payroll records, VAT workings, finance agreements and Companies House correspondence. We confirm the exact list at onboarding and identify gaps before a filing deadline becomes urgent.
The fee depends on transaction volume, record quality, VAT and payroll requirements, historic catch-up and the level of reporting needed. We agree a fixed scope and price before technical work starts, with published packages available on our fees page.
Yes. We request professional clearance, collect the prior records and authorities, check the next Companies House and HMRC deadlines, and give you one clear handover list. The process is normally completed remotely.
Yes. We work through secure cloud records, scheduled reviews and digital approvals, while keeping a named team available by phone, video call and email. Clients can also visit our Morden office by appointment.
We regularly work with Xero, QuickBooks, FreeAgent, Sage and connected sales or expense apps. The right setup depends on transaction volume, integrations and the reports you need, not simply the software brand.
The relevant calendar may include annual accounts, Corporation Tax payment and return dates, confirmation statements, VAT returns, payroll submissions and Self Assessment. We map the dates from your company year end and registrations.
No. This page explains general UK rules and common accounting treatment. Your facts, contracts and wider tax position must be reviewed before you rely on a conclusion.
Included approach
Check the current rules
Deadlines, thresholds and filing rules change. GOV.UK and Companies House publish the current statutory position; advice should then be applied to your company’s circumstances.
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