Guide

AI and the VAT reverse charge for UK construction invoices

16 October 2026Shaun, 20+ years in UK construction

When the VAT domestic reverse charge applies to UK building work, what the invoice must say, and the end-user note from HMRC.

A normal VAT invoice adds the VAT and the customer pays it to you. On many construction jobs between two VAT-registered businesses, you do not add that VAT to the amount they pay. They account for it to HMRC. That is the domestic reverse charge. A chat tool can lay out the note HMRC expects, using words you have checked. It cannot decide that this customer is an end user, and it must not put VAT on top of the total because that is how your last invoice looked.

The rules below were read from GOV.UK on 16 October 2026. None of the links are affiliate links. This page is not a VAT ruling. The rate for a particular job sits in HMRC's notices, not in a draft.

Shaun, 20+ years in UK construction, still asks whether the customer is VAT registered before the invoice goes out. We search the AI world every week so you don't have to. The reverse charge is a rule about who reports the VAT. It is not a discount.

When it applies, including work that ends up in a house

HMRC's page for suppliers (opens in a new tab) says you must use the reverse charge if you are VAT registered in the UK, you supply building and construction services, and all of these are true: your customer is VAT registered in the UK, the payment is reported within the Construction Industry Scheme, the services are standard or reduced rated, you are not an employment business supplying staff or workers, and the customer has not given written confirmation that they are an end user or an intermediary supplier.

The page that lists the services (opens in a new tab) includes constructing, altering, repairing, extending, demolishing or dismantling buildings or structures, and installing heating, lighting, air-conditioning, ventilation, power, drainage, sanitation, water or fire protection. It includes painting or decorating the inside or the outside of a building. It also includes work that is part of preparing or finishing those services, such as site clearance, foundations, scaffolding, and landscaping. Read the full list on that page before you assume a small job is outside it. There is a matching list of services where you must not use the reverse charge. Do not let a draft skip that list.

A householder is the case people get wrong in both directions. HMRC's technical guide (opens in a new tab) says that if the services are provided to a private domestic customer, the reverse charge does not apply, because that customer will not be VAT registered. You then use the normal VAT rules for the job. The same paragraph says this does not make you an end user. If you are a contractor supplying the householder, and a subcontractor supplies you, the reverse charge can still apply to the subcontractor's invoice to you, where the other conditions are met. The plasterer invoicing a homeowner charges VAT in the normal way if they are VAT registered. The same plasterer invoicing a VAT-registered builder, for work the builder will pass on, is often on the reverse charge. Those are two different bills.

Where your sales are clearly set up for domestic customers, the technical guide says you do not have to check VAT, CIS, or end-user status, and normal VAT rules apply. If you also work for contractors, ask each of those customers whether they are VAT registered, whether they are CIS registered, and whether they are an end user. Check a UK VAT number. For CIS, HMRC says to use the Construction Industry Scheme online service. It also says some contractors will not show up on that check. If they do not, ask them to confirm they are reporting under CIS before you apply the reverse charge, unless they have told you they are an end user or an intermediary.

The rate, if VAT is due in the normal way, is the one in VAT Notice 708 (opens in a new tab) and on GOV.UK's VAT rates (opens in a new tab). A chat tool must not pick 5% or 20% for you. You type the rate that notice gives for this job.

Employment businesses that supply staff or workers are outside the reverse charge, even where CIS applies. The technical guide says so. Hiring a labourer through an agency is not the same invoice as buying plastering from a subcontractor.

What the invoice has to say

HMRC's technical guide says that when you supply a service under the domestic reverse charge you must show everything a VAT invoice requires, note that the reverse charge applies and that the customer accounts for the VAT, and state how much VAT is due under the reverse charge. If you cannot show the amount, state the rate of VAT. Do not include that VAT in the amount charged to the customer.

The VAT regulations, as HMRC describes them on that page, say the invoice must include the reference "reverse charge". Wording HMRC gives as enough includes "VAT Act 1994 Section 55A applies", "S55A VATA 94 applies", and "Customer to pay the VAT to HMRC". If your software cannot show the VAT amount, the same page says to add that the customer is to account to HMRC, and to make sure they can see which lines are reverse charge.

The customer records the VAT on their return and reclaims it under the normal input-tax rules. You do not collect it and you do not pay that output tax over from this invoice. Flat Rate Scheme users who make reverse charge supplies must leave those supplies out of the Flat Rate calculation. HMRC says they should consider whether the scheme is still useful, because under the scheme they cannot recover VAT on materials and overheads. That is a reason to read the technical guide, not a reason for a chat tool to tell you to leave the scheme.

The invoice guide covers a normal bill and a chaser. Use it for the unique number, your address, and the date. Then add the reverse charge note only where the tests above are met. The CIS guide is the income-tax deduction a contractor may take from what they pay you. Reverse charge VAT is not that deduction. A draft that subtracts 20% CIS and also adds 20% VAT onto the cash the builder pays you has mixed the two schemes.

End users have to say so in writing

An end user, in HMRC's words, is a business that uses the construction service for itself and does not make an onward supply of it. Building contractors are not usually end users. The reverse charge does not apply to an end user or an intermediary supplier only once they have told you in writing. Until that note exists, and the other conditions are met, you apply the reverse charge.

HMRC says the note can be on paper, electronic, or in the contract. Their example of wording is: "We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge." Keep a copy. If you did not charge the reverse charge because of that note, HMRC expects you to be able to produce it.

Being an end user is optional. If you think the customer is one but they have not written to say so, the technical guide says you should still apply the reverse charge, where they are VAT and CIS registered. You can ask them. They do not have to agree to be treated as an end user. A line in your own terms that says you will assume they are an end user unless they say otherwise is something HMRC allows you to include. It puts the reply on them. It is not the same as you deciding, in a chat, that a landlord or a shopfitter is an end user because the job "sounds domestic".

Intermediary suppliers are VAT and CIS registered businesses connected or linked to an end user, who buy the services and pass them on without a material change. They can notify you in writing, and they can call themselves end users in that note. Snagging does not turn you into an end user. HMRC says remedial work still relates to the original construction supply.

If goods are supplied with the construction services, the technical guide says that is a single supply and the reverse charge applies to the full value of the invoice, with some concessions on that page. Do not split materials off to "avoid" the reverse charge unless that page says the concession fits. A chat tool has not read your invoice.

Draft the reverse-charge note for this invoice. UK English. Use only what I type.

Rules:
- Do not add VAT onto the amount the customer pays.
- Do not decide that the customer is an end user. If I have not pasted their written note, do not invent one.
- Include the words "reverse charge".
- State the VAT amount if I typed one. If I typed only a rate, state the rate and do not calculate a figure I did not type.
- Do not include a VAT number, a UTR, or a bank account.

Customer is VAT registered in the UK: yes or no
Payment is reported under CIS: yes or no
I am an employment business supplying staff: yes or no
Written end-user or intermediary note received: yes or no
VAT rate or VAT amount I have already worked out:
Services, in my words:

If any of the first three answers is no, or the written note is yes, do not use the reverse charge wording. Go back to a normal VAT invoice, at the rate you took from HMRC's notice. Read the draft against this page, then against the technical guide, before you send it.

Common questions

Does the reverse charge apply to a householder?

HMRC says it does not, because a private domestic customer is not VAT registered. You use the normal VAT rules on that invoice. If a subcontractor invoices you for work you are passing on to that householder, the reverse charge can still apply to the subcontractor's bill.

What must the invoice say?

HMRC says it must include the reference "reverse charge", show that the customer accounts for the VAT, and state the VAT amount or the rate. Do not add that VAT to the amount the customer pays. Wording HMRC gives as enough includes "Customer to pay the VAT to HMRC".

When does an end user stop the reverse charge?

Only after they tell you in writing that they are an end user or an intermediary supplier. Until that note exists, HMRC says you still apply the reverse charge if the other conditions are met. Keep a copy of the note.

Is the reverse charge the same as the CIS 20% deduction?

No. CIS is an advance payment towards tax and National Insurance, taken by the contractor and paid to HMRC. The reverse charge is about which business reports the VAT. Both can apply to the same job. They are not the same sum.