VAT Reverse Charge for Construction Services (UK 2025)

The Reality: The VAT domestic reverse charge is easy to get wrong. The biggest mistake is charging VAT when you should not, which creates cash flow confusion and rework. This guide shows how to apply it safely in 2025.

If you need VAT basics first, start with VAT Registration Guide for Trade Businesses 2026.

The 60-second reverse charge test

Answer these quickly for each job:

1. Are both parties VAT registered?
2. Is the work within CIS scope?
3. Is the customer not the end user?
4. Is the supply not excluded by a specific exemption?

If the answer is yes to the first three, the reverse charge likely applies. If you are unsure, confirm with your accountant.

For CIS context, read Complete CIS Tax Guide for Subcontractors 2026.

End user and intermediary test (plain English)

An end user is a customer who receives construction services for their own use and does not re-supply them. If the customer is the end user, the reverse charge does not apply.

An intermediary is a connected business that is part of the same group as the end user. In that case, the reverse charge also usually does not apply.

End user confirmation template (copy and paste)

Use this when quoting:

Please confirm whether you are the end user for this construction service (i.e., you are not re-supplying it). If yes, the VAT reverse charge will not apply and we will charge VAT as normal.

Keep the reply on file in case of HMRC questions.

Reverse charge invoice wording (copy and paste)

Your invoice should state:

VAT reverse charge: Customer to account for VAT to HMRC.
This invoice is subject to the domestic reverse charge for construction services.

You still show the VAT rate and amount, but you do not charge it to the customer.

If you need invoice structure, see Invoice Template for Trades (UK 2025).

Simple example (numbers)

Job value: GBP 5,000 VAT rate: 20 percent VAT amount: GBP 1,000

Invoice total due from customer: GBP 5,000 Customer accounts for VAT: GBP 1,000

You do not collect the VAT. The customer declares it on their VAT return.

Common mistakes to avoid

• Charging VAT to an end user when reverse charge should not apply
• Failing to add the reverse charge statement on the invoice
• Not confirming VAT registration status up front
• Using the wrong template for a mixed job

If you are worried about inspection readiness, read How to Handle VAT Inspection Without Panicking.

Practical workflow for 2025

Before quoting

• Verify customer VAT number
• Confirm CIS status and end user position
• Tag the job as reverse charge or standard VAT

During delivery

• Keep job evidence (photos, notes, change requests)
• Track any scope changes that affect tax status

On invoicing

• Use the correct invoice template
• Include the reverse charge wording
• Save the end user confirmation if applicable

Monthly review

• Audit a sample of invoices for correct VAT treatment
• Fix any template errors before they repeat

When to ask for help

If a job is mixed (some CIS, some not), or the customer sits in a group structure you do not understand, ask your accountant. It is faster than re-issuing invoices later.

Where Toolfy fits

Toolfy lets you tag jobs as reverse charge and use dedicated invoice templates so the correct wording appears every time. Start a free trial if you want to reduce manual errors.

FAQ

Do I need to check CIS for every job? Yes. Reverse charge only applies to CIS-related construction services.

Does it apply to domestic customers? Usually no. Most residential customers are end users.

What if the customer refuses the reverse charge? You must follow HMRC rules. Ask your accountant before deviating.