# construction.vat-reverse-charge
Decides whether the UK VAT domestic reverse charge for building and
construction services (VAT Act 1994 s.55A, in force from 1 March 2021) applies
to one supply. It also gives the note the invoice must carry when it does. Under
the reverse charge the supplier invoices without VAT and the customer accounts
for the VAT to HMRC.
## The conditions, in the order they are checked
The first condition that fails becomes the `reason`, so every answer explains
itself and the three languages agree on which reason wins:
| reason | the reverse charge does not apply because |
|---|---|
| `before-start` | the tax point is before 1 March 2021 |
| `supplier-not-vat-registered` | the supplier is not UK VAT registered (and charges no VAT at all) |
| `customer-not-vat-registered` | the customer is not UK VAT registered, e.g. a householder |
| `not-reported-under-cis` | the payment is not reported within the Construction Industry Scheme |
| `not-standard-or-reduced` | the supply is zero-rated or exempt |
| `employment-business` | the supplier is an employment business supplying staff or workers |
| `end-user-notified` | the customer has said in writing that it is an end user or intermediary supplier |
| `five-percent-disregard` | the reverse charge services are 5% or less of the whole supply |
| `reverse-charge` | none of the above: it applies (`applies` is true) |
**End users and intermediary suppliers.** Being one only changes anything
once the customer has told the supplier **in writing**. Until then HMRC says
the supplier must still apply the reverse charge. An intermediary supplier is
connected or linked to the end user, either with a relevant interest in the
same land (landlord and tenant) or as part of the same corporate group
(Companies Act 2006 s.1161). It gives the same kind of written notice, so both
cases are the one `endUserNotified` flag rather than a separate
connected-party input.
**The 5% disregard** is judged on the contracted values agreed at the start
of the contract, not invoice by invoice. Pass that share as
`reverseChargeShareBasisPoints` (10000 when the whole supply is construction
services). The guide says "5% or less", so exactly 500 is disregarded, and
normal VAT rules then apply to the whole supply. When the predominant element
is zero-rated, the supply is not standard or reduced-rated in the first place,
so `not-standard-or-reduced` is reported.
## Invoice wording
When the reverse charge applies, `invoiceWording` is
"Reverse charge: customer to pay the VAT to HMRC. S55A VATA 94 applies."
The VAT Regulations 1995 require the reference "reverse charge", and the other
two phrases are HMRC's own examples ("Customer to pay the VAT to HMRC", "S55A
VATA 94 applies"). The invoice must also show the VAT due under the reverse
charge (or the rate, if the amount cannot be shown) without adding it to the
amount charged. That is for the invoice itself; `finance.tax.add-vat` gives
the amount.
The start date, the 5% threshold and the wording are dated data in
`data/reverse-charge.json`. A `history=current` build refuses a date before
its horizon rather than calling it `before-start`.
## Not covered
Credit notes spanning the March 2021 change, the transitional scaffolding
rules, and whether a service is within CIS at all (that is the caller's
`reportedUnderCis`). The CIS deduction itself is `construction.cis-deduction`.
## Sources
- HMRC, "VAT reverse charge technical guide":
https://www.gov.uk/guidance/vat-reverse-charge-technical-guide (start date
1 March 2021, end users and intermediary suppliers, employment businesses,
the 5% disregard, invoice wording).
- HMRC, "How to use the VAT reverse charge if you supply building and
construction services":
https://www.gov.uk/guidance/how-to-use-the-vat-reverse-charge-if-you-supply-building-and-construction-services
(the list of conditions).
- HMRC, "VAT domestic reverse charge for building and construction services":
https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services