Domestic Reverse Charge VAT Calculator UK 2026
Calculate how the construction domestic reverse charge affects your invoices and VAT return — and generate compliant invoice wording automatically.
DRC VAT Calculator
How the Construction Domestic Reverse Charge Works
The domestic reverse charge (DRC) for building and construction services was introduced on 1 March 2021 to combat VAT fraud in the construction supply chain. Under DRC, the recipient of the construction services — not the supplier — accounts for VAT to HMRC.
This means subcontractors no longer collect and remit VAT; instead, they issue invoices showing the applicable VAT rate but charging £0 VAT. The customer (if VAT registered and not an end user) self-accounts for the VAT on their own return, treating it as both input and output tax simultaneously.
DRC applies to supplies within the scope of CIS, where both parties are VAT registered, and the customer makes onward supplies of construction services (is not an end user).
Frequently Asked Questions
What is the domestic reverse charge for construction?
The domestic reverse charge (DRC) for construction services, introduced in March 2021, requires the customer (not the supplier) to account for VAT on construction services. The supplier issues an invoice showing the net amount and states that DRC applies. The customer pays the net amount and accounts for the VAT on their own VAT return as both output and input tax.
When does the domestic reverse charge apply?
DRC applies when: (1) the supply is of construction services within the CIS scope, (2) both supplier and customer are VAT registered, (3) the customer is not an end user (i.e. they will make onward supplies of the construction services), and (4) the supply is not zero-rated. If the customer is an end user or connected employer, standard VAT rules apply.
Who is an end user for DRC purposes?
An end user is someone who does not make onward supplies of the construction services — for example, a property owner who hires a contractor to build or renovate their own premises. End users (and intermediary suppliers connected to them) are excluded from DRC: the supplier charges VAT in the normal way. The customer must notify the supplier in writing that they are an end user.
How does DRC affect cash flow?
DRC significantly improves cashflow for subcontractors in the supply chain. Previously, subcontractors collected VAT from customers and held it until their VAT return — effectively lending money to HMRC. Under DRC, the subcontractor never collects VAT, eliminating both the cashflow benefit and the risk of VAT fraud. For customers, DRC is cashflow neutral as they self-account.
How do I invoice under the domestic reverse charge?
A DRC invoice must show: the net amount, the VAT rate that applies, and a clear statement that DRC applies and the customer must account for the VAT. The supplier charges £0 VAT and receives only the net amount. Example wording: "Domestic Reverse Charge: Customer to account for VAT of £[amount] to HMRC. VAT Act 1994 Section 55A applies."