The VAT domestic reverse charge for construction

The domestic reverse charge (DRC) changed how VAT works on a lot of construction jobs, and it still catches people out. Here's the short version.

What it does

For certain construction services between VAT-registered businesses, the customer accounts for the VAT instead of the supplier. So rather than you charging VAT and handing it over, your customer deals with it. You don't collect that VAT at all.

Why it matters to you

It changes how you word your invoices and how your VAT return looks. Get it wrong and you can either overcharge a customer or land yourself with penalties. It also affects your cash flow, because you're no longer holding that VAT money between collecting it and paying it over.

When it applies

• Both you and your customer are VAT-registered and CIS-registered.
• The work falls within the scope of CIS.
• Your customer isn't the end user.

The takeaway: the reverse charge isn't optional, and the detail matters. We make sure your invoices are worded right and your returns are spot on.