How does the VAT reverse charge work for construction?
Under the CIS domestic reverse charge, a VAT-registered subcontractor doing construction work for another VAT-registered business doesn't charge VAT on the invoice. The customer accounts for the VAT to HMRC instead. The invoice must state that the reverse charge applies and show the VAT rate or amount the customer must account for. It doesn't apply to work for end users.
The domestic reverse charge has applied to most building and construction services since March 2021. It was brought in to stop VAT fraud in the supply chain. In short: if you're a VAT-registered sub working for a VAT-registered contractor on CIS work, you invoice for your work but not the VAT — and you write on the invoice that the reverse charge applies.
It catches a lot of trades out, because getting it wrong means either charging VAT you shouldn't or leaving it off when you should have added it. The rules turn on who the customer is (end user or not) and whether both sides are VAT- and CIS-registered.
InstaQuote works this out for you. Set up your VAT and CIS status once, and it applies the reverse charge on the right jobs and prints the correct wording on the invoice automatically — so you don't have to second-guess it on every job.