Reverse Charge VAT Calculator
Enter the net value of the services to see what goes on the invoice, how much VAT the customer accounts for, and which VAT return boxes to fill in.
Result
Enter the net value to see the result.
Reverse charge VAT vs reverse VAT calculation
The two names sound alike but mean different things:
| Reverse VAT calculation | Reverse charge VAT | |
|---|---|---|
| What it is | Maths: finding the VAT inside a VAT-inclusive price | An accounting rule: the customer, not the supplier, accounts for the VAT |
| Example | £120 including 20% VAT = £100 net + £20 VAT | Supplier invoices £1,000; customer records £200 VAT in boxes 1 and 4 |
| Tool | Reverse VAT calculator | This page |
Worked example: £10,000 of construction services at 20%
A VAT-registered subcontractor carries out £10,000 (net) of building work for a VAT-registered main contractor, and the payment is reported under CIS.
| Supplier (subcontractor) | Customer (main contractor) | |
|---|---|---|
| Invoice | £10,000 net, VAT of £2,000 shown as due under the reverse charge, total payable £10,000 | Pays the supplier £10,000 |
| Box 1 | Nothing for this sale | + £2,000 |
| Box 4 | – | + £2,000 (if fully reclaimable) |
| Box 6 | + £10,000 | – |
| Box 7 | – | + £10,000 |
| VAT paid to HMRC on this job | £0 | £0 net (£2,000 − £2,000) |
Without the reverse charge, the supplier would charge £12,000 and pay the £2,000 VAT to HMRC.
When the construction reverse charge applies
The VAT domestic reverse charge for building and construction services has applied since 1 March 2021. A supplier uses it when all of these are true:
- the customer is registered for VAT in the UK
- payment for the supply is reported under the Construction Industry Scheme (CIS)
- the services are standard-rated (20%) or reduced-rated (5%)
- the supplier isn't an employment business supplying staff or workers
- the customer hasn't confirmed in writing that they're an end user or intermediary supplier
End users and intermediary suppliers. An end user is VAT- and CIS-registered but doesn't make onward supplies of the building and construction services it receives. If the customer tells the supplier in writing (by post, by email or in the contract) that it is an end user or intermediary supplier, the supplier charges VAT in the normal way. If the notice isn't given correctly, the customer is liable for the VAT that should have been accounted for under the reverse charge.
The 5% disregard. If any services in a supply are subject to the reverse charge, normally all of it is. But if the reverse charge part is 5% or less of the whole supply's value, it can be disregarded. The 5% is worked out on the overall contract value, not invoice by invoice, both parties must agree it from the start of the contract, and it doesn't apply where there is a single supply and the main element is zero-rated.
What to put on a reverse charge invoice
The supplier should:
- note on the invoice that the domestic reverse charge applies and that the customer must account for the VAT – HMRC's examples include "VAT Act 1994 Section 55A applies", "S55A VATA 94 applies" and "Customer to pay the VAT to HMRC"
- state how much VAT is due under the reverse charge or, if that can't be shown, the VAT rate
- not include the VAT in the amount charged to the customer
The calculator above gives a ready-to-copy note that combines these examples.
Services bought from abroad
When a UK VAT-registered business buys services from a supplier outside the UK and the reverse charge applies, there is no UK supplier to account for the VAT. The customer includes the transaction on their own VAT return:
| Box | Entry |
|---|---|
| Box 1 | the output tax (VAT due) |
| Box 4 | the input tax (VAT reclaimed, subject to the normal rules) |
| Box 6 | the full value of the supply |
| Box 7 | the full value of the supply |
Note the difference from construction: here the value goes in both box 6 and box 7.
Cash accounting and the Flat Rate Scheme
- Cash accounting: you can't use the VAT Cash Accounting Scheme for supplies or services you buy or sell under the reverse charge.
- Flat Rate Scheme: reverse charge supplies aren't accounted for under the scheme. Flat rate businesses that make supplies under the reverse charge leave their value out of the flat rate calculation.
Sources: HMRC – VAT reverse charge technical guide, How to fill in and submit your VAT Return (VAT Notice 700/12) and Place of supply of services (VAT Notice 741A).
Frequently asked questions
What is reverse charge VAT?
Under the reverse charge, the customer accounts for the VAT instead of the supplier. The supplier invoices the net amount only, and the customer adds the VAT to box 1 of their own VAT return as output tax and, subject to the normal rules, reclaims it in box 4.
Is reverse charge VAT the same as a reverse VAT calculation?
No. A reverse VAT calculation works out the VAT inside a VAT-inclusive price, for example £120 ÷ 1.2 = £100 net and £20 VAT. The reverse charge is an accounting rule that moves the job of paying VAT to HMRC from the supplier to the customer. Use the reverse VAT calculator on our home page for the first.
Who pays the VAT under the reverse charge?
The customer. They pay the supplier the net amount and account for the VAT on their own VAT return. If they can reclaim it in full, the box 1 and box 4 entries cancel out and no VAT changes hands.
What do I write on a reverse charge invoice?
Make clear that the domestic reverse charge applies and that the customer must account for the VAT. HMRC's examples include 'VAT Act 1994 Section 55A applies', 'S55A VATA 94 applies' and 'Customer to pay the VAT to HMRC'. Show the amount of VAT due under the reverse charge (or the rate if you can't show the amount), but don't include it in the amount charged.
Which VAT return boxes does the customer use for construction services?
Box 1 for the VAT due, box 4 for the VAT reclaimed and box 7 for the net value of the purchase. The customer doesn't enter the purchase as a sale in box 6.
Which VAT return box does the supplier use?
Only box 6, for the net value of the sale. The supplier must not enter any output tax in box 1 for a reverse charge sale.
When does the construction reverse charge not apply?
It doesn't apply if the customer isn't VAT-registered in the UK, if the payment isn't reported under the Construction Industry Scheme, if the services are zero-rated, if you're an employment business supplying staff or workers, or if the customer has told you in writing that they're an end user or intermediary supplier.
Can I use cash accounting for reverse charge supplies?
No. HMRC says you can't use the VAT Cash Accounting Scheme for supplies or services you buy or sell that are subject to the reverse charge.