The Construction Industry Scheme (CIS) VAT reverse charge

The Construction Industry Scheme (CIS) VAT reverse charge

The Construction Industry Scheme (CIS) VAT reverse charge- From 1 March 2021, are you ready?

The new reverse charge will apply to supplies of construction work from 1 March 2021 but only to supplies made business to business.

What is it?

The reverse charge will apply when all the following are met:

  • The supply for VAT consists of services and materials that fall under the CIS scheme. For more details
  • The supply is subject to a standard or reduced-rate of VAT.
  • Where both the supplier and customer are registered for UK VAT and CIS
  • The customer intends to make an ongoing supply of construction services to another party.
  • The 2 parties cannot be connected

The CIS reverse charge does not apply :

  • Where the supply would normally be VAT exempt
  • Where supplies are not covered by the CIS unless linked to such a supply.
  • Where only staff are supplied e.g. as an agency where the supplying business does not oversee the construction.
  • Where your customer is not VAT registered
  • Where your customer is an End User or Intermediary supplier. For end-users, you should get written confirmation on paper, in an email or in a contract. For more details.

Other situations to note

  • If there is a reverse charge element in a supply, then the whole supply will be subject to the domestic reverse charge.
  • If there has already been a reverse charge service between two parties on a construction site, and if both parties agree, any subsequent construction supplies on that site between the same parties can be treated as reverse charge services.
  • If the reverse charge applies to more than 5% of contracts (by volume or value) with a sub-contractor, then the reverse charge may be applied to all the contracts.

If a customer has not given written confirmation of their end-user or intermediary supplier status, the supplier must assume that the reverse charge applies and will not charge VAT to the customer.

Things to Consider

  • Does your software cope with reverse charges? We are able to help you with solutions if your software does not.
  • You may not be able to use flat rate or cash accounting
  • Your cash flow may be affected
  • Consider including new terms on your quotes to state you will treat all customers as end-users unless they tell you otherwise so you can continue using the old VAT method.

Do you use XERO?

The reverse charge module is now live in the software. There is also going to be a webinar on the subject on 26th Feb at 10 am that should be available for download after the event.

For more details on how to operate the scheme and applicable dates see the details on our website

If you need help, please get in touch


Content kindly supplied by Maynard Johns Chartered Accountants