From 1 October 2019 HMRC is changing how it collects VAT on some construction services (“the domestic reverse charge”).


What does it mean?


The domestic reverse charge means that contractors will no longer charge VAT for works that are within the scope of the charge except where they are supplying an “End User” or an “Intermediary Supplier”.  An “Intermediary Supplier” is a deemed “End User”.


The domestic reverse charge only applies to supplies subject to VAT at the standard rate or reduced rate.  If your supplies are zero rated, the normal VAT rules will continue to apply.


Where your client is not an “End User” or “Intermediary Supplier”, you will not have the cash flow benefit of holding VAT until you are due to pay it to HMRC. You need to factor this into your cash flows.


Further Information?


For more detailed guidance on supplies that are within the scope of CIS and the domestic reverse charge, please see HMRC’s booklet CIS 340 and HMRCs Domestic Reverse Charge guidance at the following link and speak to your tax advisor.




This post does not, and is not intended to, provide tax advice, and any one reading this post should consult their accountants for specific tax advice.


Worked Example


Main contractor purchases VAT standard rated supplies (goods and services) for £20,000 (excluding VAT) from a Sub-Contractor and charges this on to an end user at £30,000 (excluding VAT):


  1. The sub-contractor will not charge VAT on their invoice/application instead stating that the domestic reverse charge applies; and


  1. The main contractor will pay the net amount only (£20,000) to the sub-contractor.


  1. The main contractor will account for output VAT of £4,000 on the supply from the subcontractor and recover input VAT in accordance with normal rules; and


  1. The end user will pay £30,000 plus £6,000 VAT to the main contractor who will account for a further £6,000 output VAT to HMRC as before.