VAT Reverse Charge For Construction And Building Services

14th April 2022

VAT-registered construction businesses should note that this reverse charge came in on 1 March 2021. Revenue and Customs Brief 7 (2020) contains more information. 

In January 2021, a letter was sent to every VAT-registered construction business. This followed letters previously sent out in February 2020 and September 2020, advising them to check if they're liable for the reverse charge. If they're liable, they need to apply these rules.

Find more information on the scope and operation of the reverse charge.  See https://www.gov.uk/guidance/vat-reverse-charge-technical-guide

The key aspects are: 

It applies to standard and reduced-rated supplies of building and construction services made to VAT and Construction Industry Scheme (CIS) registered businesses, who in turn also make onward supplies of those building and construction services.

The contractor is responsible for paying the output VAT due rather than the sub-contractor, and can continue to reclaim this amount as input tax.

The scope of supplies affected is closely aligned to the supplies required to be reported under the CIS, but does not include supplies of staff or workers for use by the customer.

Supplies to CIS registered businesses can be excluded from the reverse charge if the customer is an ‘end user' or ‘intermediary supplier’ (a business that is closely associated with an end user). This exclusion covers property developers and other ‘deemed contractors’ provided that the construction services concerned are not being re-supplied by them.  However, this exclusion is optional and only applies if the customer notifies their supplier in writing that they are an ‘end user’ or ‘intermediary supplier’. This can be done by correspondence or as part of terms and conditions. There is more detail in the VAT reverse charge technical guidance. 

We’ve been running webinars for businesses and they can register now. If there are no dates available, a webinar recording can be viewed. 

 Find more information on the Construction Industry Scheme.  See https://www.gov.uk/government/publications/construction-industry-scheme-cis-340