Reverse charge VAT in the UK: when and how
How UK reverse charge VAT works for cross-border services, CIS construction and high-risk goods.
Reverse charge VAT shifts the responsibility for accounting for VAT from the supplier to the VAT-registered customer. It crops up in three quite different settings: cross-border B2B services, the CIS domestic reverse charge in construction, and a small set of high-risk goods like mobile phones and computer chips. Each has its own logic and its own bookkeeping rhythm.
When the reverse charge applies
| Scenario | Who applies it | Why |
|---|---|---|
| Services bought from overseas supplier | UK VAT-registered buyer | Place of supply is the UK |
| Construction services within CIS | UK VAT-registered subcontractor’s customer | Anti-fraud measure |
| Mobile phones, computer chips over £5,000 | UK buyer of bulk wholesale | Anti-fraud (missing trader) |
| Wholesale gas, electricity, telecoms | UK buyer | Anti-fraud |
The supplier issues an invoice without VAT but with a clear note such as “Reverse charge: customer to account for VAT to HMRC”.
Bookkeeping under the reverse charge
Reverse charge entries are VAT-neutral for fully taxable businesses, because the buyer simultaneously declares output VAT (Box 1) and reclaims it as input VAT (Box 4).
| VAT return box | Reverse charge service from EU |
|---|---|
| Box 1 (output VAT) | + 20% of net |
| Box 4 (input VAT) | + 20% of net (if recoverable) |
| Box 6 (total sales ex VAT) | unchanged |
| Box 7 (total purchases ex VAT) | + net amount |
| Net VAT impact | nil (if fully taxable) |
If the business is partially exempt, the recovery in Box 4 is restricted, leaving a real VAT cost — a common surprise for charities and financial services firms.
CIS domestic reverse charge
The construction industry version is mandatory for VAT-registered subcontractors supplying VAT-registered contractors that aren’t end users. The subcontractor invoices net of VAT and writes “Reverse charge: customer to pay VAT to HMRC”. The contractor reports the VAT on its own return.
- Confirm your customer’s UTR and CIS verification before applying it
- Apply only to standard- and reduced-rate supplies, not zero-rated
- Get an end-user statement from customers who occupy the building
- Watch joint contracts where some services are reverse-charged and others aren’t
- Reflect the change in cash flow forecasts; subcontractors lose VAT cash flow benefit
- Update invoice templates and accounting software VAT codes
Bringing it home
The mechanics aren’t difficult, but the boxes need to be set up correctly the first time you apply each variant. Pair this with our CIS construction industry scheme article, the VAT codes in bookkeeping guide, and the Making Tax Digital explainer. Cross-check with the HMRC reverse charge guidance . See pricing for VAT-aware bookkeeping software.