CIS Reverse Charge: How to Invoice Correctly in UK Construction

What Is the CIS Domestic Reverse Charge?

Since 1 March 2021, the domestic reverse charge for building and construction services changed how VAT works in the UK construction industry. Under the reverse charge, the customer (not the supplier) accounts for the VAT on their VAT return.

Since 1 March 2021, the domestic reverse charge for building and construction services changed how VAT works in the UK construction industry. Under the reverse charge, the customer (not the supplier) accounts for the VAT on their VAT return. The supplier does not charge VAT on their invoice.

This was introduced to combat missing trader fraud in the construction sector, where subcontractors would charge VAT, collect it from the contractor, and then disappear without paying it to HMRC.

When Does the Reverse Charge Apply?

The reverse charge applies when all three conditions are met:

The reverse charge applies when all three conditions are met:

1. The supply is of specified construction services (building, repair, demolition, civil engineering, installation of heating/lighting/power systems)
2. Both parties are VAT-registered
3. The supply is reported under the Construction Industry Scheme (CIS)

It does not apply to:

• Supplies to end users (homeowners, non-CIS businesses)
• Supplies of materials only (without labour)
• Professional services (architects, surveyors) — unless they include construction work
• Zero-rated construction work (new-build residential properties)

How to Create a Reverse Charge Invoice

Your reverse charge invoice must include all the standard HMRC invoice requirements, plus:

Your reverse charge invoice must include all the standard HMRC invoice requirements, plus:

1. The statement: "Reverse charge: VAT Act 1994 Section 55A applies"
2. The amount of VAT that would have been charged — show it as a reference figure
3. Your customer's VAT number
4. Do NOT include VAT in the total — the invoice total should be the net amount

Example Reverse Charge Invoice

Reverse charge: VAT Act 1994 Section 55A applies

What Happens on the VAT Return

For the Subcontractor (Supplier)

• Report the net value in Box 6 (total value of sales)
• Do not include any VAT in Box 1

For the Contractor (Customer)

• Calculate the VAT amount and include it in both Box 1 (output tax) and Box 4 (input tax)
• The net effect is zero — but HMRC sees the transaction

Common CIS Reverse Charge Mistakes

Common CIS Reverse Charge Mistakes includes: Applying the reverse charge to end-user supplies — if your customer is a homeowner or non-CIS business, charge VAT normally Forgetting the mandatory statement — without "Reverse charge: VAT Act 1994 Section 55A applies", your invoice is non-compliant

1. Applying the reverse charge to end-user supplies — if your customer is a homeowner or non-CIS business, charge VAT normally
2. Forgetting the mandatory statement — without "Reverse charge: VAT Act 1994 Section 55A applies", your invoice is non-compliant
3. Including VAT in the payable total — the customer must not pay you VAT; they account for it themselves
4. Not verifying CIS registration — always confirm your customer is CIS-registered and VAT-registered before applying the reverse charge

Create CIS-Compliant Invoices

Invoicemonk supports reverse charge invoicing with the mandatory statement, correct formatting, and VAT calculation.

Invoicemonk supports reverse charge invoicing with the mandatory statement, correct formatting, and VAT calculation. Get started →