VAT and domestic reverse charge in the construction industry: update

Earlier this year, we covered the Construction Services Domestic Reverse Charge (“CSRDC”) and the rules being introduced for VAT, as from 1 October 2019. That article, which you can read here, was based on guidance which had been published by HMRC in November 2018 and is available here.

As expected, further guidance to clarify some aspects of the CSDRC rules has now been published by HMRC and is available here.

A few additional points have been raised in this guidance e.g. employment businesses supplying construction workers. The guidance also sets out a number of scenarios where the rules may apply.

Areas about which the guidance gives further information include:

  1. Monthly VAT returns – businesses which find themselves in a repayment position following the implementation of the CSDRC rules
  2. Active contracts with sub-contractors for a variety of sites – standardised VAT accounting treatment where the CSDRC applies to more than 5% of contracts with the same subcontractor
  3. Question re end user / intermediary status – an example provided of suitable wording that may be used where the recipient of services is either the final customer or somebody connected with him
  4. Customer check as to VAT / CIS status or end user – for businesses regularly dealing with consumers / final customers, an example is provided of wording that may be used as a practical way of dealing with this situation
  5. Invoicing requirements – how the “customer” must be able to identify the reverse charged goods / services and an example of what narrative may be used on an invoice raised
  6. Employment businesses – businesses supplying construction workers and the rules surrounding whether the CSDRC will apply

Who is affected?

As previously established, these changes are likely to affect contractors and subcontractors alike.

Also relevant is our earlier article on the case of PORR Epitesi Kft, where the Hungarian tax authorities decided that VAT was irrecoverable on a similar “CSDRC” issue. This serves as a timely reminder of how HMRC officers are likely to deal with errors following the introduction of these rules on 1 October 2019.

For more information, please get in touch with your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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