How does reverse charge VAT work in the UK?
Answered 11 March 2026
Here is a comprehensive explanation of how reverse charge VAT works in the UK.
What the law says
The legal basis for the domestic reverse charge is section 55A of the Value Added Tax Act 1994 (VATA 1994), which places the obligation to account for VAT on the customer rather than the supplier for specified goods and services.
The reverse charge has been extended by statutory instrument to cover a range of specified goods and services, including:
- Mobile phones and integrated circuit devices (e.g. CPUs/microprocessors in a state prior to integration into an end-user product), subject to a de minimis threshold of £5,000 per supply
- Wholesale telecommunications services (voice and data)
- Emission allowances
- Gas and electricity certificates
- Building and construction services (mirroring the scope of the Construction Industry Scheme)
The reverse charge for wholesale telecommunications does not apply to retail supplies or to supplies already subject to the cross-border reverse charge under s.8 VATA 1994.
HMRC guidance / practice
Core Principle
The reverse charge is a fraud-prevention measure designed to counter Missing Trader fraud. It creates a business-to-business (B2B) tax-neutral chain: the seller no longer charges or accounts for VAT, removing the opportunity to steal VAT in B2B transactions within the UK. Supplies remain subject to the reverse charge until they are excepted from the procedure or exported outside the UK.
The reverse charge only applies between UK taxable persons — i.e. the customer must be registered or liable to be registered for UK VAT.
How it works in practice
Under the reverse charge:
- The supplier does not charge VAT and issues an invoice indicating that the reverse charge applies.
- The customer accounts for the VAT as output tax in Box 1 of their VAT return, and simultaneously reclaims it as input tax in Box 4 (subject to normal VAT recovery rules).
- The supplier only fills in Box 6 (value of supply); the customer fills in Boxes 1, 4, and 7.
This produces the same net result as if the customer had paid VAT to the supplier, the supplier had accounted for it, and the customer had recovered it — but with no VAT actually changing hands.
Example (construction services): A subcontractor invoices a contractor £10,000 (VAT-exclusive) for installing a ventilation system. The subcontractor does not charge the £2,000 VAT. The contractor accounts for £2,000 as output tax and reclaims £2,000 as input tax — a nil net effect. The contractor then charges VAT normally on their onward supply to the end customer.
Types of reverse charge in the UK
There are several distinct reverse charges, each with its own rules:
| Type | Guidance |
|---|---|
| Cross-border (international) reverse charge — services from non-UK suppliers | VAT Notice 741A |
| Domestic reverse charge — electronic goods, emission allowances, wholesale telecoms, renewable energy certificates | VAT Notice 735 |
| Domestic reverse charge — natural gas and electricity | VAT Notice 735 / 701/19 |
| Domestic reverse charge — building and construction services | VAT Notice 735 (construction) |
| Special accounting scheme for gold | VGOLD1500 |
Revenue risks
Although the reverse charge removes the opportunity for fraud in B2B chains, it still carries risks — for example, a buyer disappearing without accounting for the reverse charge output tax.
Adjustments
If the value of a reverse charge supply changes after the original accounting period, the customer adjusts both their output tax and input tax accounts under regulation 38 of the VAT Regulations 1995. If the revised value takes the supply outside the reverse charge, the supplier adjusts their output tax and the customer adjusts both accounts under regulation 38A.
Citation sources
Where the construction reverse charge applies, the supplier of the services does not charge VAT, and the liability to account for the VAT shifts from the supplier to the customer. The customer does not pay any VAT to the supplier, but accounts for it as output VAT in box 1 of their return, and can also generally recover it as input VAT in box 4 of their return (subject to normal VAT recovery rules). This produces the same net result as if the customer had paid VAT to the supplier, the supplier h
The domestic reverse charge for building and construction services is one of several reverse charges. While the basic principle is the same, there are some differences in how they are applied, so it is essential that you consult the correct guidance for the relevant goods or services. Other reverse charges include: The reverse charge on services supplied by a non-UK supplier (VATPOSS14000 and VAT Notice 741A) – this includes building and construction services supplied by non-established supplier
Citation and commencement 1 1 This Order may be cited as the Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2019. 2 This Order comes into force on 1st March 2021 and has effect in relation to supplies made on or after that date. Interpretation 2 1 In this Order— “ the Act ” means the Value Added Tax Act 1994; “ end user ” means a taxable person who is a recipient of specified services and uses those services for any purpose other than making further supplies of sp
Citation, commencement and effect 1 1 This Order may be cited as the Value Added Tax (Section 55A) (Specified Services and Excepted Supplies) Order 2016. 2 This Order comes into force on 1st February 2016 and has effect in relation to supplies made on or after that date. Interpretation 2 In this Order— “ the Act ” means the Value Added Tax Act 1994; “ specified services ” means the services specified in article 4. Application of section 55A of the Act 3 1 Section 55A of the Act (customers to acc
Citation, commencement and effect 1 1 This Order may be cited as the Value Added Tax (Section 55A) (Specified Services) Order 2019. 2 This Order comes into force on 14th June 2019 and has effect in relation to supplies of specified services made on or after that date. Interpretation 2 In this Order— “ gas ” means gas supplied through the natural gas distribution system; “a gas or an electricity certificate” is an electronic document which contains information on the source of the energy and its
Under the reverse charge procedure, the buyer of the goods or services, rather than the seller, is liable to account for the VAT on the sale. You need to use the following information to complete your VAT return. If you use the reverse charge for gold or international services, and you’re the: supplier — fill in box 6 (value of the supply) customer — fill in box 1 (output VAT), box 4 (input VAT), box 6 (value of the deemed supply) and box 7 (purchase value) If you use the reverse charge for mobi
Where a supplier offers a credit or contingent discount, if both parties agree the concession in paragraph 18.2.1 of VAT guide (VAT Notice 700), which allows both parties not to make VAT adjustments, the concession can be applied to reverse charge adjustments. The complexities involved in making adjustments are likely to make this the easiest option, but the other methods are set out in paragraph 10.2 to 10.4. Adjustments could be required, for example because of changes in price after the invoi
duction: Background) which states: “The reverse charge procedure is a measure designed to counter some forms of criminal attack on the VAT system by means of fraud, such as Missing Trader fraud (see VATF23300). The reverse charge procedure results in, essentially, a business-to-business (b2b) tax-neutral chain of transactions, with the seller no longer having to account for VAT, so it removes the opportunity to steal VAT in b2b transactions within the UK …. Supplies of relevant goods and service
The reverse charge procedure is a measure designed to counter some forms of criminal attack on the UK VAT system by means of fraud, such as Missing Trader fraud (see VATF23300). The reverse charge procedure results in, essentially, a business-to-business (b2b) tax-neutral chain of transactions, with the seller no longer having to account for VAT, so it removes the opportunity to steal the VAT in b2b transactions within the UK (for an example see VATREVCHG21000). Supplies of relevant goods and se
Citation, commencement and effect 1 1 This Order may be cited as the Value Added Tax (Section 55A) (Specified Goods and Services and Excepted Supplies) Order 2010. 2 This Order shall come into force on 1st November 2010 and has effect in relation to supplies made on or after that date. Revocation 2 The Value Added Tax (Section 55A) (Specified Goods and Excepted Supplies) Order 2007 is revoked. Interpretation 3 In this Order— “ the Act ” means the Value Added Tax Act 1994; “allowance” means— an a
Part 2 Anti-avoidance and revenue protection Value added tax and insurance premium tax Extension of reverse charge provisions to supplies of services 50 1 In section 55A of VATA 1994 (customers to account for tax on supplies of goods of a kind used in missing trader intra-community fraud), after “goods” (in each place, including the heading) insert “ or services ” . 2 In paragraph 2(3B) of Schedule 11 to that Act (power to require notifications relating to supplies to which section 55A(6) applie