VAT domestic reverse charge for construction: when does it apply?

Quick answer: the construction domestic reverse charge can apply where VAT-registered businesses supply qualifying construction services that are reported under CIS. Instead of the supplier charging the VAT, the customer accounts for the VAT on its own VAT return.

DRC decision flowchart

Use this as a practical first check. Mixed supplies and unusual contractual chains can require a closer review.

Why does the reverse charge exist?

The measure is designed to reduce VAT fraud in construction supply chains. It changes who accounts for VAT; it does not turn a standard-rated service into a zero-rated service.

What is an end user?

An end user has a specific meaning for DRC. Broadly, it is a VAT-registered customer that receives qualifying construction services for its own use rather than making an onward supply of those construction services. The exclusion normally depends on the customer notifying its supplier of end-user status in writing.

Normal VAT vs DRC example

What should the invoice say?

The invoice should make clear that the domestic reverse charge applies and show enough information for the customer to account for the VAT. Your accounting software should also use the appropriate reverse-charge VAT treatment.

Common DRC mistakes

• Assuming every construction invoice is reverse charge.
• Confusing CIS deduction status with DRC eligibility.
• Ignoring end-user notifications.
• Charging VAT as normal when DRC applies.
• Treating DRC as zero-rating.
• Failing to configure bookkeeping software correctly.

Frequently asked questions