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VAT Reverse Charging – What you need to know

HMRC June 2019 Guidance Document is available here.

From the 1st October 2020 certain sales invoices will be subject to new VAT provisions. VAT Reverse Charging will apply to the following contracts:

• Those where the participants are subject to CIS.

• Those where the end-user (Employer) is retaining the built asset for their own use.

• Those where ‘sales’ comprise labour, material and/or plant.

• Those that may include an element of excluded sales but where those excluded items form part of the whole.

VAT Reverse Charging will NOT apply to the following sales / contracts:

• Sales entirely consistent of supply-only assets.

• Sales entirely comprising of the installation of security systems (burglar alarm) closed circuit television and public address systems.

HMRC's approach to mixed supplies: 

The legislation is designed so if there is a reverse charging ‘element’, in a supply, then the whole supply will be subject to Reverse Charging. A significant amount of communication will be required.

If in doubt, provided the recipient is VAT registered, and the payments are subject to CIS, it is recommended that the reverse charge should apply.

View our VAT Reverse Charging For Building Construction Services diagram here

Members are advised to download our letter template to distribute it to their supply chain partners.

View latest guidance on Domestic VAT Reverse Charge 

Additional Resources

01. HMRC Definitions 29 July 2019
02. JTC - Reverse Charge VAT 06 November 2019
03. VAT Reverse Charge Letter Template - Supply Chain Partners 01 October 2020
04. VAT Reverse Charge Letter Template - Subcontractor 10 June 2019
05. Training & Guidance on Reverse Charge VAT  10 June 2019
06. HMRC - Definitive Guidance on VAT Reverse Charge 10 June 2019
07. Reverse Charge VAT - Cash Flow Model 06 November 2019
08. Reverse Charge VAT - Simple Cash Flow Calculator 06 November 2019
09. Thinking of sending in monthly VAT returns to enable faster repayments? 06 November 2019
10. Letter to Rt Hon Rishi Sunak MP 22 May 2020


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