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Crane lifting on construction site


The CIS VAT domestic reverse charge measure was due to commence in October 2019 and has already been delayed twice due to Brexit and the Coronavirus. It will apply to supplies of construction work from 1 March 2021



The new reverse charge for builders is aimed at preventing “missing trader” VAT fraud in the construction industry. This is where a contractor charges another business output tax, but then disappears without making good the tax to HMRC. Unfortunately, due to some ‘bad eggs’ in the construction industry, all builders and contractors have to account for VAT this way from 1st March 2021.

The new rules mean that builders no longer charge VAT on invoices they issue to other VAT-registered construction industry customers. The customer (i.e. the contractor) will instead declare the VAT on their own returns and claim input tax as well, i.e. a self-accounting entry.


All VAT-registered businesses in the construction industry will need to consider whether the new rules apply to their supplies from that date.

The reverse charge needs to be applied when all the following conditions are met:

  • The supply for VAT consists of construction services and materials.

  • It is made at a standard or reduced-rate of VAT.

  • Between a UK VAT registered supplier and UK VAT registered customer.

  • Supplier and customer are registered for CIS.

  • The customer intends to make an ongoing supply of construction services to another party.

  • The supplier and customer are not connected.

The CIS reverse charge does not apply to supplies of VAT exempt building and construction services nor supplies of staff or workers. It also does not apply to taxable supplies made to non-VAT registered customers nor ‘intermediary suppliers’ who are connected (e.g. a landlord and his tenant or two connected companies).

Example: Nigel is a VAT-registered plumber who is supplying the materials to renovate a bathroom for a VAT-registered contractor who is also supplying their construction services to a VAT-registered developer. The developer will then bring the new bathroom (as part of a new building project) to clients.

Under the old VAT system, the plumber would invoice the contractor for the net cost of his materials, labour and work plus 20% VAT. However, under the new reverse charge mechanism the plumber would invoice for the net amount whilst stating on the invoice that ‘the CIS reverse charge applies’ and the applicable rate of VAT. The contractor pays the plumber the net amount and then accounts for output and input VAT on the supply on their own VAT return.

Please see a link to HMRC's Guidance below for more information.

We are also on hand to help guide you through the process, so please feel free to contact us for more information.

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