If you’re a VAT registered business in the United Kingdom working in the building and construction industries, Reverse Charge laws may apply to you. 

Under the guidelines set by HM Revenue and Customs (HMRC), you must use the Reverse Charge if:

• You and your customer are VAT registered in the UK.
• You supply building and construction services at a standard or reduced rate.
• Payment for the supply is reported within the Construction Industry Scheme (CIS).
• You’re not an employment business supplying either staff or workers, or both.
• Your customer hasn’t given written confirmation that they are an end-user or intermediary supplier.

How does Reverse Charge work?

When you apply Reverse Charge to an invoice, your client will be responsible for reporting and paying the VAT amount to HMRC instead of directly to you. Although you won’t collect VAT from your client on that invoice, you’re still required to show the amount on the invoice without adding it to the subtotal. This way, your client will know how much to report and pay to HMRC. 

Additionally, a tax note is required to be added to the bottom of your invoice informing your client that Reverse Charge applies. When you use the Reverse Charge feature, a tax note will automatically be added to your invoice that reads, 

“Reverse Charge applies. Customer to pay VAT for Reverse Charge items to HMRC. VAT Act 1994 Section 55A.”

To ensure compliance, the inclusion of this comment is mandatory and can’t be edited.

If you’re unsure whether you need to add Reverse Charge to your invoices, refer to the guidelines set by HMRC or consult with your accountant or tax professional.

Adding Reverse Charge to your invoice

When you’re applying Reverse Charge to an invoice, it must be added to each item, individually. To do so, please refer to the following steps:

iOS 

1. From the invoice creation screen, tap Add item
2. Enter your item details or, select an existing item
3. Select your VAT rate
4. Toggle on Reverse Charge
5. Tap Add

Android

1. From the invoice creation screen, tap Add item
2. Enter your item details or, select an existing item
3. Tap More options
4. Select your VAT rate
5. Toggle on Reverse Charge
6. Tap the blue checkmark in the top right corner to save your changes

Web

1. From the invoice creation screen, click on Add items
2. Enter your item details or, select an existing item
3. Click on VAT, days or hours, discount
4. Select your VAT rate
5. Check the box next to Reverse Charge
6. Click on Save

Your item will now appear on your invoice with the VAT amount displayed but not added to the subtotal.

How Reverse Charge appears on your invoice 

Below is an example of an invoice with Reverse Charge applied. Notice the VAT amount is displayed but not added to the subtotal. Additionally, the tax note is located directly below the balance due, indicating that your customer is responsible for paying VAT for Reverse Charge items to HMRC.