From 1 March 2021, businesses within the Construction Industry Scheme (CIS) must record, report and pay VAT under the new VAT domestic reverse charge rules.

This change affects both contractors and subcontractors and the supply of certain kinds of construction services in the UK.

Under the new rules, VAT registered subcontractors who provide a service and any related goods to a VAT-registered contractor who is CIS-registered no longer need to account for the VAT.

Instead, it is the contractor or developer who will account for the VAT as an input tax, as if they made the supply to themselves.

For reverse charge purposes, consumers and final customers are called end users. They are businesses, or groups of businesses, that are VAT and Construction in Industry Scheme registered but do not make onward supplies of the building and construction services supplied to them.

The reverse charge does not apply to supplies to end users where the end user informs a supplier or building contractor that they are an end user. This should be done in writing to maintain accurate records.

HMRC has defined a list of construction services that the new reverse charge rules apply to. These include (but are not limited to)

• 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

Where a mixed supply is made containing a reverse charge and ‘normal element’ then you should apply the reverse charge to the entire supply.

You will need to make changes to your invoicing and accounting procedures to take the reverse charge into account, but this may differ depending on whether you are a contractor or subcontractor.


The HMRC link above has important information about this VAT reverse charge, and there is also a helpful flowchart on there to help you decide when the VAT reverse charge scheme applies