Reverse charge invoice wording

The wording to put on the invoice

HMRC says a reverse charge invoice must include the reference “reverse charge”. It gives these as wording that meets the legal requirement:

• VAT Act 1994 Section 55A applies
• S55A VATA 94 applies
• Customer to pay the VAT to HMRC

Slater prints “Customer to pay the VAT to HMRC. VAT Act 1994 Section 55A applies.” under a Reverse charge heading, and labels the VAT line “VAT 20% (reverse charge)”.

What else the invoice must show

HMRC says the supplier must:

• show everything a normal VAT invoice needs (what a VAT invoice must include)
• make clear that the reverse charge applies and that the customer accounts for the VAT
• state the VAT due under the reverse charge, or the rate if the amount can’t be shown, and leave it out of the amount charged

When the reverse charge applies

You must use it when all of these are true:

• you’re VAT registered in the UK and supply building or construction services
• your customer is VAT registered in the UK
• the payment is reported under the Construction Industry Scheme (CIS)
• the work is standard or reduced rated
• you’re not an employment business supplying staff or workers
• your customer hasn’t told you in writing that they’re an end user or intermediary supplier

Work for a homeowner is never under the reverse charge, because a private customer isn’t VAT registered. Charge VAT as normal.

End users and the 5% disregard

An end user is a VAT- and CIS-registered business that doesn’t sell the construction work on to anyone, such as a company having its own offices refitted. Once they tell you in writing that they’re an end user, charge VAT as normal.

When the reverse charge part of a single supply is 5% or less of its value, such as the fitting on a supply-and-fix order, normal VAT can apply instead. You and your customer agree this at the start, on the contract value. HMRC says not to work it out invoice by invoice.

Worked example

A VAT-registered electrician does first fix on a new-build plot for a main contractor that’s VAT and CIS registered:

The contractor pays you £1,430, less any CIS deduction on the £1,120 of labour, and accounts for the £286 VAT on its own VAT Return.