Construction industry VAT reverse charge

Construction subcontractors do not charge VAT to contractors. A large cash flow change.

What it means

Under the domestic reverse charge, a subcontractor supplying construction services to a VAT-registered contractor does not charge VAT; the contractor accounts for it.

Why it matters

It removed a substantial cash flow benefit from subcontractors, who previously held the VAT for up to three months.

What it looks like in practice

It does not apply to supplies to end users or intermediary suppliers, who must confirm their status in writing. Getting that confirmation is the contractor's responsibility to give and the subcontractor's to obtain.\n\nInvoices must state that the reverse charge applies.

What to watch out for

Charging VAT where the reverse charge applies, which leaves the customer unable to reclaim it and you holding money to refund. And missing the end user exception, which is the reverse error.

Where to get proper advice

GOV.UK for the current rates and thresholds, which move most years. Your accountant before acting — this is exactly the kind of question a fee is for.