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United Kingdom

Do you charge VAT on this invoice?

Six conditions decide it and all six have to hold. Answer them and the page builds the invoice: the VAT shown but not added, the statement it has to carry, and the CIS deduction that comes off the same document.

This decides the rate, and the rate decides the second condition. Zero rated work is outside the reverse charge entirely.

The conditions

Leave one unanswered and the page will not print a VAT figure. That is deliberate.

Is the work a construction operation under CIS?

Site preparation, building, alterations, repairs, decorating, demolition and installing heating, lighting, power, water or drainage are in. Architecture and surveying, scaffolding hire with no labour, carpet fitting, and delivering materials are out.

Are you VAT registered?
Is your customer VAT registered?
Is your customer CIS registered, and reporting this payment under CIS?
Has your customer sent written end user or intermediary supplier notification?

This is the one the trade shorthand skips. If they sent it, you charge VAT normally, and you keep the notification because it is the evidence for why.

Are you supplying construction work or supplying staff?

An employment business supplying workers is outside the charge even when everything else fits.

Not enough answered to decide

Charging VAT when the reverse charge applies is exactly as wrong as leaving it off when it does not, so no VAT figure is printed while a condition is open.

Still open: C1 (the supply is a construction operation within CIS scope); C3 (supplier and customer are both UK VAT-registered); C4 (the customer is CIS-registered / the payment is reported within CIS); C5 (the customer has NOT given written end-user or intermediary-supplier notification); C6 (the supplier is not an employment business supplying staff or workers).

The chain, condition by condition

  • C1. the supply is a construction operation within CIS scope

    Not answered

    If it does not hold: normal VAT.

  • C2. the supply is standard-rated or reduced-rated; zero-rated supplies are outside DRC

    Holds

    If it does not hold: normal VAT or zero rate.

  • C3. supplier and customer are both UK VAT-registered

    Not answered

    If it does not hold: normal VAT.

  • C4. the customer is CIS-registered / the payment is reported within CIS

    Not answered

    If it does not hold: normal VAT.

  • C5. the customer has NOT given written end-user or intermediary-supplier notification

    Not answered

    If it does not hold: normal VAT — the supplier charges VAT.

  • C6. the supplier is not an employment business supplying staff or workers

    Not answered

    If it does not hold: normal VAT.

Worked example

A £5,000 subcontract invoice, under the reverse charge

Standard-rated work for a VAT and CIS registered contractor who has not notified end user status: £4,000 of labour, £1,000 of materials, and you are verified for CIS at 20%.

Net value of the supply

£5,000.00

VAT you charge

£0.00

£1,000.00 is shown on the invoice and accounted for by the customer.

What lands in your bank

£4,200.00

£800.00 of CIS comes off the labour element.
Open this example and answer for your own job

Questions this page answers

When does the domestic reverse charge apply?
When all six conditions hold: the work is a construction operation within CIS scope, the supply is standard or reduced rated, supplier and customer are both UK VAT registered, the customer is CIS registered, the customer has not given written end user notification, and the supplier is not an employment business supplying staff.
What is end user notification?
Written notification from your customer that they are an end user or an intermediary supplier. It switches the reverse charge off, so you charge VAT normally. Keep the notification on the client record, because it is the only evidence of why that invoice carried VAT.
Do I still show VAT on a reverse charge invoice?
Yes. The VAT amount or the rate is shown, the invoice states that the domestic reverse charge applies and that the customer must account for the VAT, and the amount is not added to what is payable.
Does the reverse charge apply to zero rated work?
No. A zero rated supply is outside it, which is why the work type decides the second condition before any of the others are asked.
Does CIS still come off a reverse charge invoice?
Yes, and both happen on the same document. The reverse charge decides who accounts for the VAT. CIS decides how much of the labour element the contractor withholds and pays to HMRC on your behalf.

Or let the invoice work it out every time

This page runs the same engine the platform runs on a real invoice. Set the client up once, and every invoice to them decides the reverse charge from the answers on the record, stamps the statement, shows the VAT without adding it, and takes the CIS off the labour element.

When a customer sends end user notification, it goes on the client record as a document, and the invoices after it carry VAT again with the reason attached.

Open the demo businessRead the reverse charge guide

Where these figures come from

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