The VAT domestic reverse charge for building and construction services applies from 1 October 2019. It is an anti-fraud measure – an administrative change, impacting invoicing and VAT return procedures.

With a reverse charge, a VAT-registered recipient of services accounts for VAT, rather than the supplier. The rules will apply to VAT-registered businesses where payments are required to be reported through the Construction Industry Scheme (CIS), the charge will be used along the supply chain, until the recipient is no longer a VAT-registered business making an onward supply of specified construction services.

With the new rules, suppliers (VAT-registered subcontractors), will state on their invoices that supplies are subject to the reverse charge. Contractors will then use their VAT returns to account for output VAT on supplies received, instead of paying output VAT to their suppliers. Subject to normal VAT rules, the contractor can reclaim VAT on supplies received as input tax, usually leaving no net tax payable on the transaction. Where there is an ‘end user’, it will be expected to provide notification of end user status to suppliers, signalling that a supplier should charge VAT as usual.