Knowledge Base — VAT Domestic Reverse Charge for Construction

The VAT domestic reverse charge for building and construction services is a change in how VAT is handled for certain kinds of construction services in the UK, along with the building and construction materials used directly in those services (although it doesn't apply to building and construction materials supplied separately and independently of any construction services).

The VAT reverse charge for construction is effectively an extension of the Construction Industry Scheme (CIS) and applies only to transactions between VAT-registered contractors and sub-contractors who are registered for the CIS.

The scheme means that those supplying construction services to a VAT-registered customer will no longer have to account for the VAT. Instead, the customer will account for the VAT (that is, it will be considered input tax for them, as if they've made the supply to themselves).

In even simpler terms, for services they provide, sub-contractors will require the contractor employing them to handle and pay the VAT directly to HMRC. The payment received will be for the cost of the work done (plus materials used).

The VAT domestic reverse charge for construction begins from 1 October 2019.