What is the Construction Industry Scheme (CIS) VAT reverse charge? What are the rules? Who does it apply to? 

Subscribers click on CIS: Construction Industry reverse charge for your detailed version of this guide with worked examples, templates and client questionnaires.

This is a freeview 'At a glance' guide

At a glance

The Construction Industry VAT Domestic Reverse Charge (DRC) measure applies to supplies of construction work from 1 March 2021. The measure was due to commence in October 2019 and was Delayed twice due to Brexit and the Coronavirus.

Key conditions

Apply the reverse charge when all the following are met:

The CIS reverse charge does not apply to any of the following supplies:

The CIS reverse charge does not apply to taxable supplies made to the following customers:

The aim of the measure is to reduce VAT fraud in the construction sector.

It will have required a significant change of approach in many CIS businesses:

Example: How the CIS reverse charge works

John the Roofer (who is VAT registered) supplies the materials and roofs a new office building for Mr Contractor (who is also VAT registered) and in turn supplies its construction services to Ms Developer (also VAT registered). Ms Developer finds and develops land and will, in this case, bring the build to completion and supply a finished commercial building to Enduser, its client.

From March 2021, under the new CIS reverse charge mechanism, he invoices £100,000. His invoice states that 'the CIS reverse charge applies' (see invoicing requirements in subscriber guide: CIS: Construction Industry reverse charge) and that the applicable rate of VAT is 20%.

What services are within the CIS reverse charge?

Excluded services

Certain services can become included

HMRC example

Treatment of existing contracts to be ready for 1 March 2021

The VAT treatment is determined for payments due on any supplies entered into your accounting system before 1 March 2021, but paid on or after 1 March 2021.

Date entered in customer’s accounting systemDate payment madeVAT Treatment
Before 1 March 2021 On or before 31 May 2021 Normal VAT rules
Before 1 March 2021 On or after 1 June 2021 Domestic reverse charge
On or after 1 March 2021 On or after 1 March 2021 Domestic reverse charge


For contracts starting after 1 March 2021, you should decide whether the reverse charge applies from the start of the contract.

VAT schemes

VAT payment


When supplying a service subject to the CIS reverse charge, suppliers must show all the information that is normally required on a VAT invoice, except that:

Under VAT Regulation 1995, invoices for services subject to the reverse charge where the customer is liable for the VAT must include the reference ‘reverse charge’. Here are some examples of wording that meets the legal requirement:

Useful guides on this topic

CIS: Construction Industry reverse charge
What is the CIS VAT reverse charge? How do you account for VAT? Can you still cash account for VAT? What administrative changes do I need in order to operate the reverse charge? 

CIS: Contractors and Subcontractors
What is the Construction Industry Scheme? Who does it apply to? How does it work?

Construction Industry Sub-contractors: What expenses can I claim?
What expenses can sub-contractors claim for tax purposes? Are there special tax and accounting rules for sub-contractors? What are the rules for VAT for sub-contractors? 

External link

HMRC: VAT reverse charge technical guide

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