If you work in construction and you're VAT-registered, the domestic reverse charge changes who pays the VAT to HMRC. The question that decides everything is whether you count as the "end user" on a particular job.
Get it right and the invoicing is simple. Get it wrong and you either hand VAT to a supplier who should never have charged it, or you fail to account for VAT you owe. Both cause problems at your next VAT inspection.
This guide explains, in plain English, what an end user actually is, how to tell whether you are one, and the short written notification that switches the reverse charge off when it applies to you. It's written for contractors, subcontractors and developers across the trades. If you'd like this handled properly, that's exactly what we do for construction businesses.
Am I the end user under the construction reverse charge?
You're the end user when you're VAT and Construction Industry Scheme (CIS) registered and you receive construction services that you do not pass on, you use them for your own purpose rather than reselling them as part of your own construction supply. A developer building to sell or let, or a business doing work on its own premises, is usually the end user. A subcontractor invoicing a main contractor up the chain is not. When you're the end user, you tell your supplier in writing and they charge VAT the normal way.
What is the VAT domestic reverse charge?
The VAT domestic reverse charge for building and construction services came into force on 1 March 2021. Instead of the supplier charging VAT and paying it to HMRC, the customer accounts for that VAT on their own VAT return. The supplier issues an invoice showing no VAT to pay, just a note that the reverse charge applies, and the customer puts the VAT through as both output tax and (subject to the normal rules) input tax.
It was brought in to tackle "missing trader" fraud, where a subcontractor charged VAT, collected it, then vanished without paying HMRC. By moving the VAT accounting to the customer, there's no VAT cash flowing down the chain to disappear.
The charge applies to a supply only when all of these are true:
- both you and your customer are VAT-registered
- the customer is registered for CIS
- the services fall within the scope of CIS (so they're reported as construction operations)
- the supply is standard-rated (20%) or reduced-rated (5%)
- the supplier is not an employment business simply supplying staff
- the customer has not given a written end user or intermediary supplier notification
If any one of those fails, you charge VAT in the normal way. The last point is the one this guide is really about, because being the end user is the most common reason the reverse charge switches off.
Who counts as the end user?
HMRC defines an end user as a business (or group of businesses) that is VAT and CIS registered but does not make onward supplies of the construction services it receives. In plain terms, the work stops with you. You're the final business consumer of that construction service, not a link passing it further up a chain.
Typical end users include:
- a property developer having a building constructed or refurbished to sell or let
- a business having work done on its own premises (an office fit-out, a warehouse extension)
- a landlord commissioning works on a property it owns
The test is about what you do with the service, not your trade. A construction company can still be an end user on a job. If a building firm has its own head office refurbished, it's the end user of that refurbishment, because it isn't reselling those services to a customer of its own.
The flip side is the easy bit. A subcontractor invoicing a main contractor, who in turn invoices the developer, is making an onward supply. They are not the end user, and the reverse charge applies on their invoice.
What about intermediary suppliers?
There's a second category that gets treated the same way as end users: intermediary suppliers. These are VAT and CIS registered businesses that are connected or linked to an end user and that buy in construction services then sell them on to that connected end user, without making any material alteration to the supply.
You're connected or linked for this purpose if either:
- you share a relevant interest in the same land where the construction works happen, the classic case being a landlord and tenant, or
- you're part of the same corporate group or undertaking (as defined in section 1161 of the Companies Act 2006)
Why does this matter? It means a group can route construction work through a connected company, or a landlord and tenant arrangement, without the reverse charge bouncing down the chain. An intermediary supplier can notify in writing in the same way an end user does, and HMRC's guidance lets intermediary suppliers refer to themselves as end users when they do so. From the supplier's point of view, the effect is identical: normal VAT, charged the normal way.
How do I notify my supplier that I'm the end user?
This is the practical step that trips people up. The reverse charge does not automatically switch off just because you happen to be an end user. You have to tell your supplier in writing. If you don't, the supplier should apply the reverse charge anyway, because the default position is that it applies.
HMRC's suggested wording is short. You can use something like:
"We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Please issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge."
A few points worth knowing:
- It's not compulsory. A business eligible to be an end user can choose not to opt out and let the reverse charge apply, though most prefer the simpler normal-VAT treatment.
- The notification should be given at or before the time of supply, not bolted on months later.
- A contract clause can do the job. If your supplier's terms say they'll treat you as an end user unless you tell them otherwise, and you agree to those terms, that agreement counts as the written notification.
Keep a copy of whatever you send. At a VAT inspection, where a supplier has charged VAT normally, HMRC will often ask to see the evidence that end user status was confirmed by the customer. No notification on file is a common reason these invoices get challenged.
When does the reverse charge not apply at all?
Plenty of supplies sit outside the reverse charge from the start, regardless of end user status. It does not apply where:
- your customer isn't VAT-registered, or isn't registered for CIS
- the customer is a private individual or consumer (a homeowner having an extension built pays VAT normally)
- the supply is zero-rated, for example construction of a new dwelling
- the work isn't a construction operation within CIS (some professional services such as architects, surveyors and certain consultants sit outside)
- you're an employment business simply supplying workers rather than a construction service
There's also a useful 5% disregard for mixed supplies. If a contract bundles reverse charge work with other goods or services, and the reverse charge element is 5% or less of the total value, you can ignore it and treat the whole supply under normal VAT rules. This is judged once across the contract value, by agreement between both parties at the outset, not recalculated invoice by invoice.
Illustrative example: a developer and a subcontractor on the same site
Illustrative example. Imagine Greenfield Developments Ltd is VAT and CIS registered and is building a block of flats to sell. It engages BuildRight Ltd as main contractor, who in turn brings in Volt Electrical Ltd as a subcontractor. All three are VAT and CIS registered. Standard-rated work, for simplicity.
| Supply | From / to | VAT treatment | Why |
|---|---|---|---|
| Electrical work, £10,000 | Volt to BuildRight | Reverse charge applies | Onward supply up the chain; BuildRight isn't the end user |
| Construction services, £40,000 | BuildRight to Greenfield | Normal VAT (£8,000) | Greenfield is the end user and has notified in writing |
Volt invoices BuildRight for £10,000 with no VAT added, marked as reverse charge. BuildRight accounts for £2,000 (£10,000 x 20%) of output tax on its own return and recovers the same as input tax, subject to the normal rules.
BuildRight invoices Greenfield for £40,000 plus £8,000 VAT (£40,000 x 20%), because Greenfield is the end user and has sent the written end user notification. Greenfield pays the £48,000 and recovers the £8,000 input tax under the normal rules.
The reverse charge runs up the chain until it reaches the end user, then stops. These figures are illustrative; your own treatment depends on your contracts, your registration status and the nature of each supply.
How does this sit alongside CIS?
The reverse charge and CIS are different systems doing different jobs, but they overlap on purpose. CIS deals with deductions from payments for the labour element, the contractor withholds tax (the standard deduction is 20% for registered subcontractors, 30% for unregistered, or 0% with gross payment status) and pays it to HMRC. The reverse charge deals with VAT on the same supplies.
The link is the CIS scope test. The reverse charge only bites on services that are construction operations reported under CIS, so if a payment falls within CIS, you then check whether the reverse charge applies to the VAT on it. If you're already operating CIS correctly, you're most of the way to applying the reverse charge correctly too.
A couple of changes worth flagging for contractors. The compliance test for gross payment status was tightened back in April 2024, when the government added VAT obligations to the checks HMRC runs and gave it the power to act faster where there's serious tax fraud. Then, separately, from 6 April 2026 a further round of CIS reform takes effect: contractors must file a nil return (or notify HMRC in advance) for any period in which they pay no subcontractors, payments to local authorities and other public bodies fall outside CIS scope, and where the behaviour leading to a gross payment status cancellation arises on or after 6 April 2026 the subcontractor cannot re-apply for that status for five years. If you rely on gross payment status, keep your VAT, Corporation Tax or Self Assessment, and CIS filings clean, because they all feed the same compliance picture. We cover the deduction side in more detail for CIS contractors.
Joining up CIS deductions, reverse charge VAT and your wider returns is fiddly work, and it's where mistakes get expensive. Our team handles it day in, day out as part of our tax advisory services.
Not sure whether you're the end user on a job, or whether your invoices are set up correctly? Book a free call with a Zmartly accountant and we'll check where you stand.
Frequently asked questions
How do I know if I'm the end user under the construction reverse charge?
You're the end user if you're VAT and CIS registered and you don't make an onward supply of the construction services you receive. If the work is for your own use, your own premises, or a property you're developing to sell or let, you're usually the end user. If you're invoicing a contractor further up the chain, you're not.
Do I have to tell my supplier I'm the end user?
Yes, in writing, if you want normal VAT charged instead of the reverse charge. Without a written end user notification, the supplier should apply the reverse charge by default. HMRC suggests confirming you're an end user for the purposes of the section 55A VAT Act 1994 reverse charge and asking for a normal VAT invoice.
What's the difference between an end user and an intermediary supplier?
An end user is the final business consumer of the construction services and doesn't pass them on. An intermediary supplier is connected or linked to an end user (through a corporate group or a shared interest in the same land, such as landlord and tenant) and buys then resells the services to that end user. Both are treated the same way: they notify the supplier in writing and the reverse charge doesn't apply.
Does the reverse charge apply to work for a homeowner?
No. A private individual or consumer isn't VAT and CIS registered, so the reverse charge doesn't apply. You charge VAT in the normal way on standard-rated or reduced-rated work for a homeowner.
Does the reverse charge apply to zero-rated construction work?
No. The reverse charge only applies to standard-rated (20%) and reduced-rated (5%) supplies. Zero-rated work, such as building a new dwelling, follows normal VAT rules and sits outside the reverse charge entirely.
What happens if my supplier charges VAT when the reverse charge should have applied?
If the reverse charge applied and the supplier wrongly charged VAT, that VAT was not correctly due, and HMRC can disallow your recovery of it as input tax. You'd need a corrected invoice from the supplier. This is why confirming end user status and applying the reverse charge correctly from the start matters, fixing it later is harder than getting it right first time.
