HMRC has published further guidance on the VAT domestic reverse charge applying from 1 October 2019 to supplies of building and construction services.

The reverse charge affects businesses who supply specified services that also need to be reported under the construction industry scheme (CIS).

The new guidance has more detail and examples to help suppliers check whether their customers are end users or intermediaries. The reverse charge does not apply to customers who are end users, or if they are ‘intermediary suppliers’. The concept of intermediary suppliers means that if a number of connected businesses collaborate to purchase construction services, they are all treated as if they are end users and the reverse charge will not apply to their purchases. For this purpose, intermediary suppliers are VAT and CIS registered businesses connected or linked to end users, who:

  • share a relevant interest in the same land where the construction works are taking place;


  • belong to the same corporate group or undertaking.

The guidance suggests a practical way of dealing with the question of end-user status would be for businesses to include a statement in their terms and conditions to say they will assume their customer is an end user, unless they say they are not.

HMRC acknowledges that some businesses who have large numbers of active contracts with sub-contractors at a variety of sites may have difficulty establishing whether the reverse charge applies or not in the run-up to 1 October 2019. The guidance therefore states that where contractors can see that the reverse charge applies to more than 5% (by volume or value) of all contracts with one sub-contractor, they may apply the reverse charge to all contracts with that sub-contractor.

Transitional arrangements mean that normal VAT rules apply to invoices for supplies entered into customers’ accounting systems before 1 October 2019 and if payment is made on or before 31 December 2019. The reverse charge will apply in all cases where invoices are entered into systems on or after 1 October 2019, or payment is made on or after 1 January 2020.

The guidance covers situations in which businesses may become repayment traders as a result of the reverse charge removing the need to pay VAT on some of their sales.  It also details how best to move over to monthly returns should this be the case.

Examples are provided of how the reverse charge will apply to supplies of construction services made to certain sectors, such as utility companies and local authorities or other public bodies, including planning gain agreements.

Employment businesses who supply staff, and who are responsible for paying the temporary workers they supply, are not subject to the reverse charge.

The guidance can be found here and a presentation done by our partners Johnathan Main and Joe Sullivan can be found here.

Further Advice

If you would like to discuss this article in more detail or you would like to speak with a member of our team, please on 01772 821021 to be put in contact with a member of our Specialist VAT Advisers team.