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Reverse charging VAT - what is it?


From March 1st the domestic VAT reverse charge must be used for most supplies of building and construction services. (see below)


Reverse charging of VAT is sure to catch out a number of businesses and HMRC must be aware of this having built in a period of six months to bed in the changes.


If you are a CIS registered subcontractor you will no longer charge VAT to your CIS customers. On your invoices you will need to state that your customer is responsible for the VAT and show what VAT rate should apply.


If you are a CIS contractor when you receive a bill from a CIS subcontractor you are responsible for reporting both the input and output VAT on that bill. (Xero have made the necessary software updates on their system)


When you must use the reverse charge


You must use the reverse charge for the following services:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services

  • constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence

  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure

  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration

  • painting or decorating the inside or the external surfaces of any building or structure

  • services which form an integral part of, or are part of the preparation or completion of the services described above - including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

For more details please visit https://www.gov.uk/guidance/vat-reverse-charge-technical-guide