Last edited 08 Sep 2020

VAT reverse charge

Value Added Tax (VAT) is a tax added to the cost of certain goods and services. It is only accountable where the party raising an invoice is VAT-registered. Parties must register if their VAT-able turnover exceeds a minimum threshold in any 12-month period.

The government announced that from 1 March 2021, a domestic VAT reverse charge would come into effect to tackle fraud in the construction industry. A reverse charge enables a customer to charge themselves VAT rather than the supplier charging it. This removes any opportunity for the supplier not to pay HMRC (missing trader fraud).

The reverse charge will apply to businesses that supply services to another business that will then sell on that service, but not those that supply services to consumers.

Sometimes referred to as the domestic reverse charge is intended to apply only to supplies of specified construction services which are subject to the standard and reduced rate of VAT, which include:

Services and supplies that will be excluded from the reverse charge include:


In July 2019, the Federation of Master Builders called for a six-month delay following research that found more than two thirds of construction SMEs had not even heard of the reverse charge.

In September 2019, following strong lobbying by the construction industry the government announced that the reverse charge would not be introduced until 1 October 2020, stating:

Industry representatives have raised concerns that some businesses in the construction sector are not ready to implement the VAT domestic reverse charge for building and construction on 1 October 2019.

To help these businesses and give them more time to prepare, the introduction of the reverse charge has been delayed for a period of 12 months until 1 October 2020. This will also avoid the changes coinciding with Brexit.


In June 2020 the Government delayed the introduction of reverse charge VAT by a further five months due to the Coronavirus pandemic. It will now be introduced on 1 March 2021.

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