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7 Apr 2022
Construction Industy Scheme (CIS) and Reverse Charge VAT
From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.
The charge applies to standard and reduced-rate VAT services:
for individuals or businesses who are registered for VAT in the UK
reported within the Construction Industry Scheme
What does Reverse Charge Mean? It means that instead of you charging VAT on your invoice to your customer, you just show the net amount and add the words "Reverse Charge Applies", "Customer to Account for VAT" on the invoice. Your customer will then be required to account for the VAT that you would normally have charged (Pre introduction of Reverse Charge Rules) on their VAT return in Box 1 (VAT on Sales) and Also in Box 4 (VAT on Purchases). Therefore in effect the Customer will not pay any VAT to HMRC in relation as the Box 1 VAT amount payable will be cancelled out by the Box 4 VAT recoverable amount due from HMRC.
How it Works
When you must use the reverse charge
You must use the reverse charge for the following services:
constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
painting or decorating the inside or the external surfaces of any building or structure
services which form an integral part of, or are part of the preparation or completion of the services described above - including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works
When you must not use the reverse charge
Do not use the charge for the following services, when supplied on their own:
drilling for, or extracting, oil or natural gas
extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose
manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site
the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
making, installing and repairing art works such as sculptures, murals and other items that are purely artistic signwriting and erecting, installing and repairing signboards and advertisements
installing seating, blinds and shutters
installing security systems, including burglar alarms, closed circuit television and public address systems
Please see HMRC Guide below for more details