Key takeaways
- Under the reverse charge the customer accounts for the VAT, not the supplier.
- It applies to most construction services between VAT-registered UK businesses.
- It also applies to many cross-border business services under the place-of-supply rules.
- The invoice must still be issued — with the right wording and no VAT charged.
- You still report the sale on your VAT return, and the customer reclaims the same amount.
What the reverse charge means
Normally the supplier charges VAT and the customer pays it. Under the reverse charge it is the other way round: the supplier does not charge VAT at all, and the VAT-registered customer accounts for it on their own VAT return — both the output tax and the matching input tax.
The net cash effect for a business that can reclaim the VAT is usually nil, which is why the reverse charge exists: it stops the VAT from being passed along a chain of businesses, each of which would otherwise have to pay it out and reclaim it back.
The two situations you will meet
Construction services (the domestic reverse charge)
Since 2019–2021 the reverse charge applies to most construction and building services supplied business-to-business between VAT-registered businesses that are registered for CIS. The subcontractor does not charge VAT; the main contractor accounts for it. This is why a VAT-registered subcontractor's invoice shows the wording “reverse charge” and no VAT figure. End users and some intermediaries are excluded, so check the rules for the specific relationship.
Cross-border services (place of supply)
When you supply services to a business customer in another country, the place of supply is usually where the customer belongs, so UK VAT is not charged and the customer accounts for the tax under the reverse charge. For business-to-consumer supplies, different rules usually apply and UK VAT may still be due — the customer's status matters.
What to write on the invoice
An invoice under the reverse charge still has to be issued, and it still needs your normal details, but with two changes:
- Do not charge VAT — the VAT amount should be zero or absent.
- Add the wording telling the customer that the reverse charge applies and they must account for the VAT, and note your VAT number and theirs. HMRC publishes the exact phrase to use for the construction reverse charge — use it as written rather than paraphrasing.
If you are billing a UK business for construction services under the domestic reverse charge, the invoice will look like a normal VAT invoice minus the VAT line. If you are billing an overseas business for services, note the place-of-supply position and the customer's VAT number.
When it does not apply
The reverse charge is not a general option you can switch on. It applies to specific supplies defined in the rules — it is not something you choose to make life easier. If you are supplying ordinary goods or services to a UK consumer, or to a non-VAT-registered UK business, you charge VAT in the normal way. Applying the reverse charge where it does not belong means under-declaring VAT.
Both sides must report it
On a reverse-charge job the supplier records the sale (with no VAT charged) and the customer records both the output tax and the input tax. Both need the invoice to do this correctly, so the wording is not decoration — it is what tells the customer's accounts team to account for the tax. If you are using our VAT invoice template, set the rate to zero for a reverse-charge line and add the wording in the description.
Send a correct VAT invoice
VAT number, rate and net/VAT/gross split already laid out — free, no sign-up.
Frequently asked questions
What does the VAT reverse charge mean?
The customer, not the supplier, accounts for the VAT on the sale. The supplier issues the invoice without charging VAT, and the VAT-registered customer records both the output tax and the matching input tax on their own VAT return.
Do I charge VAT under the reverse charge?
No. The supplier does not charge VAT. The invoice is still issued, but with no VAT amount and with wording stating that the reverse charge applies and the customer must account for the VAT.
When does the construction reverse charge apply?
To most construction and building services supplied business-to-business between VAT-registered businesses registered for CIS. End users and some intermediaries are excluded, so the relationship matters.
Does the reverse charge apply to overseas customers?
For services supplied to an overseas business customer, the place of supply is often where the customer belongs, so UK VAT is not charged and the customer accounts for the tax. Different rules generally apply to consumer customers.
What wording goes on a reverse-charge invoice?
You must tell the customer that the reverse charge applies and that they must account for the VAT, and show both VAT numbers. For the construction reverse charge, use the exact wording HMRC publishes.
Free invoice tools
General guidance only — not legal, tax or accounting advice. Rules and rates can change; check HMRC's current guidance for the latest. Last reviewed 8 October 2026.