If your business supplies construction services subject to the VAT domestic reverse charge, your customer invoice must be prepared differently from a normal VAT invoice.
You must still provide all the information required on a VAT invoice. However, you do not add the reverse charge VAT to the amount your customer pays you. Instead, the invoice must make it clear that the customer is responsible for accounting for the VAT to HM Revenue and Customs.
This guide explains what information a domestic reverse charge invoice must contain, how the VAT should be displayed and which wording can be used.
When Should You Issue a Reverse Charge Invoice?
A construction reverse charge invoice should normally be issued when:
- You are registered for VAT in the UK.
- Your customer is registered for VAT in the UK.
- The services fall within the Construction Industry Scheme.
- The payment will be reported through CIS.
- The services are subject to VAT at the standard or reduced rate.
- Your customer has not confirmed in writing that it is an end user or qualifying intermediary supplier.
If the reverse charge does not apply, you should issue a normal VAT invoice and charge VAT at the appropriate rate.
Information Required on a VAT Invoice
A domestic reverse charge invoice must contain the information normally required on a full VAT invoice.
This should include:
- A unique and sequential invoice number.
- The date the invoice was issued.
- The date the goods or services were supplied, where this differs from the invoice date.
- Your business name and address.
- Your VAT registration number.
- Your customer’s name and address.
- A clear description of the services supplied.
- The quantity of goods or extent of the services supplied.
- The unit price where relevant.
- The amount payable before VAT.
- The VAT rate that applies to each item.
- The total value of the invoice excluding VAT.
- The rate of any cash discount offered.
- The total amount payable by the customer.
If you trade under a business name, the invoice should still contain the name and address under which you are registered for VAT.
You can download our VAT invoice checklist here:
Download the VAT Invoice Requirements Checklist
Additional Reverse Charge Information
In addition to the normal VAT invoice details, a reverse charge invoice must:
- Include the words “reverse charge”.
- Make it clear that the customer must account for the VAT.
- Show the amount of VAT the customer must account for, or the applicable VAT rate if the amount cannot be shown.
- Exclude the reverse charge VAT from the amount payable to the supplier.
- Clearly identify which goods or services are subject to the reverse charge.
Approved Reverse Charge Invoice Wording
HMRC does not prescribe one compulsory sentence, but the invoice must clearly explain that the reverse charge applies.
Suitable wording includes:
- Reverse charge: customer to account for VAT to HMRC.
- Reverse charge: customer to pay the VAT to HMRC.
- Reverse charge: VAT Act 1994 Section 55A applies.
- Reverse charge: S55A VATA 94 applies.
The clearest option for most construction invoices is:
Reverse charge: customer to account for VAT to HMRC.
This wording can be displayed near the invoice totals, underneath the affected invoice lines or within the invoice notes.
How Should the VAT Be Displayed?
The amount of VAT due under the reverse charge should normally be shown on the invoice for information.
However, it must not be included:
- In the total VAT charged by the supplier.
- In the total amount payable to the supplier.
For example, if the net value of qualifying standard-rated construction work is £10,000:
| Invoice Information | Amount |
|---|---|
| Construction services | £10,000 |
| Reverse charge VAT at 20%, for information only | £2,000 |
| VAT charged by supplier | £0 |
| Total payable to supplier | £10,000 |
The customer pays £10,000 to the supplier. The customer then accounts for the £2,000 VAT through its own VAT return.
Example Reverse Charge Invoice Layout
A reverse charge invoice could contain the following information:
| Invoice number | INV-1054 |
|---|---|
| Invoice date | 28 July 2026 |
| Supply date | 25 July 2026 |
| Supplier | Example Electrical Services Ltd |
| Supplier VAT number | GB 123 4567 89 |
| Customer | Example Main Contractor Ltd |
| Description | Electrical installation services at Example Project |
| Net value | £10,000 |
| VAT rate | 20% |
| Reverse charge VAT | £2,000, for information only |
| VAT charged by supplier | £0 |
| Total payable | £10,000 |
| Invoice note | Reverse charge: customer to account for VAT to HMRC. |
You can view a downloadable example here:
Download the VAT Reverse Charge Invoice Example
What If Your Accounting Software Cannot Show the VAT Amount?
Some accounting systems cannot display reverse charge VAT separately without adding it to the invoice total.
If your software cannot show the amount of VAT the customer must account for, the invoice should:
- Clearly identify the items subject to the reverse charge.
- State the applicable VAT rate.
- Include wording explaining that the customer must account for the VAT to HMRC.
For standard-rated services, suitable wording could be:
Customer to account to HMRC for reverse charge VAT at 20% on the VAT-exclusive value of items marked reverse charge.
Do not use a normal standard-rate VAT code if it causes the VAT to be added to the customer’s payment total.
Invoices Containing Different VAT Treatments
An invoice may sometimes contain both reverse charge services and items subject to normal VAT accounting.
Where this happens, the invoice should clearly distinguish between:
- Items on which the supplier is charging VAT normally.
- Items on which the customer must account for VAT under the reverse charge.
Each invoice line should show the relevant VAT treatment. The total payable should include VAT charged normally but should exclude VAT accounted for under the reverse charge.
Where the supplies are part of one combined construction service, the reverse charge may apply to the complete supply. Dividing labour and materials between separate invoice lines does not necessarily create separate VAT treatments.
What Should the Customer Check?
A customer receiving a reverse charge invoice should check:
- The supplier’s name and VAT registration number.
- That the services supplied fall within the reverse charge rules.
- That the correct VAT rate has been shown.
- That the invoice clearly states that the reverse charge applies.
- That the reverse charge VAT has not been included in the amount payable.
- That the invoice has been entered using the correct reverse charge code in the accounting system.
If VAT has been charged when the reverse charge should apply, the customer should normally ask the supplier to issue a corrected invoice or credit note.
The customer remains responsible for applying the reverse charge where the transaction falls within the rules, even if the supplier’s invoice was prepared incorrectly.
Credit Notes for Reverse Charge Invoices
If the value of a reverse charge supply is reduced, the supplier may need to issue a credit note.
The credit note should:
- Refer to the original invoice.
- State that the reverse charge applies.
- Show the reduction in the net value.
- Show the reduction in the VAT the customer must account for.
Suitable wording could include:
Reverse charge: customer to account for the output tax adjustment of £200 to HMRC.
How the Invoice Affects the VAT Return
The supplier normally records the VAT-exclusive value of the reverse charge sale in box 6 of the VAT return. No output VAT from the sale is included in box 1.
The customer normally:
- Reports the reverse charge VAT as output tax in box 1.
- Claims eligible input VAT in box 4.
- Includes the VAT-exclusive purchase value in box 7.
The customer’s input VAT recovery remains subject to the normal VAT rules.
Common Reverse Charge Invoice Mistakes
- Adding VAT to the amount payable: Reverse charge VAT is accounted for by the customer and should not be collected by the supplier.
- Leaving out the words “reverse charge”: The invoice must clearly refer to the reverse charge.
- Failing to identify affected services: The customer must be able to see which invoice lines are subject to the reverse charge.
- Showing neither the VAT amount nor rate: The amount should normally be shown, or the rate provided where the software cannot display the amount.
- Using an ordinary VAT invoice template: This can incorrectly add VAT to the customer balance and VAT return.
- Applying the reverse charge to zero-rated work: The construction reverse charge applies to standard-rated and reduced-rated services.
- Ignoring written end-user confirmation: Normal VAT rules usually apply once a qualifying customer has confirmed its end-user status in writing.
- Splitting labour and materials incorrectly: Materials supplied as part of one construction service normally follow the treatment of that service.
Reverse Charge Invoice Checklist
- Confirm that the construction reverse charge applies.
- Check the customer’s VAT and CIS status.
- Check whether written end-user notification has been received.
- Include all normal VAT invoice details.
- Clearly identify the reverse charge services.
- Include the words “reverse charge”.
- State that the customer must account for VAT to HMRC.
- Show the reverse charge VAT amount or applicable rate.
- Do not add reverse charge VAT to the amount payable.
- Use the correct accounting software VAT code.
- Retain the invoice and supporting customer information.
How Carter Bookkeeping Services Can Help
Carter Bookkeeping Services can help construction businesses set up and maintain accurate domestic reverse charge invoicing records.
Support can include:
- Configuring reverse charge VAT codes in accounting software.
- Reviewing invoice templates.
- Checking that reverse charge VAT is not added to customer balances.
- Separating normal VAT and reverse charge transactions.
- Reviewing credit notes and invoice corrections.
- Checking how transactions feed into VAT returns.
- Preparing organised records for VAT returns.
- Completing a holistic bookkeeping review of existing VAT records.
Contact Carter Bookkeeping Services if you need help setting up reverse charge invoices or correcting existing VAT records.