Reverse charge VAT came into effect on 1 March 2021. 

Who does reverse charge VAT apply to?

Reverse charge VAT applies to standard and reduced rate VAT services supplied by individuals and businesses registered for VAT and is reported within the Construction Industry Scheme.

What is the purpose of reverse charge VAT?

The Government wants to eliminate VAT fraud in the construction supply chain. Instead of collecting multiple payments across the supply chain, HMRC now collects the total VAT due in one payment from the main contractor.

What has changed?

In every construction supply chain, there is a single payment from the end user to the main contractor. Everyone else in the chain – all the subcontractors – accounts for VAT but does not charge it nor pay it when purchasing supplies and services.

Suppliers need to provide a ‘reverse charge’ invoice that accounts for the VAT, but does not include it within the charge. They also need their customer’s VAT and CIS numbers for their own VAT returns.

Steps to implement reverse charge VAT

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