Last checked October 2026 · by the PaySorted team
When it applies
The reverse charge applies when all of these are true:
- you and your customer are both VAT registered, and your customer is also registered for CIS
- the work is construction work that must be reported under CIS
- the work is standard-rated or reduced-rated (20% or 5%)
- the customer is not the end user or an intermediary — in other words they're another contractor who'll sell the work on
It doesn't apply to work for homeowners, or for "end users" such as a landlord or business having its own premises worked on — they should tell you in writing that they're an end user.
What to write on the invoice
Show the VAT rate and the VAT amount for information, but don't add it to the total. Then add wording such as:
Reverse charge: Customer to pay the VAT to HMRC
HMRC also accepts wording like "Reverse charge: S55A VATA 94 applies".
Worked example
| Labour | £2,000.00 |
| Materials | £500.00 |
| Total excluding VAT | £2,500.00 |
|---|---|
| VAT at 20% — reverse charge (£500.00, for information) | £0.00 |
| Less CIS deduction (20% of labour) | −£400.00 |
| Amount payable | £2,100.00 |
See how to show CIS on an invoice for more on the CIS part.
The 5% rule
If the reverse-charge construction work is only a small part of a bigger job — 5% or less of the value of the whole contract — you can treat it all normally and charge VAT. This is judged on the whole contract when you agree it, not invoice by invoice, so if it applies, it applies to every invoice for that job.
Doing it in PaySorted
When you invoice a business customer, switch on Domestic reverse charge. PaySorted shows the VAT for information, leaves it out of the total and adds the reverse charge wording for you.
General information based on HMRC guidance (checked October 2026), not tax advice. Check with your accountant if you're not sure the reverse charge applies.
Common questions
What wording do I put on a reverse charge invoice?
"Reverse charge: Customer to pay the VAT to HMRC" — and show the VAT rate and amount for information without adding it to the total.
Does the reverse charge apply to homeowners?
No. It only applies between VAT-registered businesses for CIS construction work where the customer isn't the end user.
When did the domestic reverse charge start?
1 March 2021.