VAT Domestic Reverse Charge (DRC) Construction Calculator

Calculate VAT domestic reverse charge for construction services. From March 2021: VAT paid to HMRC directly by customer, not contractor. CIS registered businesses only.

Construction VAT Reverse Charge Calculator

From 1 March 2021: The domestic reverse charge applies when a VAT-registered CIS subcontractor provides construction services to a VAT-registered contractor. The customer accounts for VAT — not the supplier.

Net Invoice Amount (£, ex-VAT)

Your Role

VAT Rate

Is the customer end-user (not a CIS contractor)?

Frequently Asked Questions

What is the construction domestic reverse charge?

From 1 March 2021, VAT on construction services in the CIS supply chain is accounted for by the customer (contractor), not the supplier (subcontractor). This is the domestic reverse charge (DRC).

Which services are subject to DRC?

Services that fall within the scope of CIS (construction industry scheme): groundworks, masonry, roofing, plastering, electrical, plumbing, carpentry, decorating, etc. Not professional services like architects and surveyors.

How do I invoice under DRC?

Issue your invoice for the net amount (ex-VAT). Do NOT include VAT. Write: 'Reverse charge: customer to account for output VAT of £X to HMRC at the standard/reduced rate.'

Does DRC apply to end users?

No — if your customer is the end user of the building (e.g., a property developer not making further taxable supplies of that building), DRC does not apply. Normal VAT rules apply.

What if my customer hasn't told me they're an end user?

Get written confirmation from your customer that they are an end user or intermediary supplier. If they give false confirmation, they become liable for any unpaid VAT.

Can a flat-rate scheme business use DRC?

Businesses on the VAT Flat Rate Scheme cannot use DRC. HMRC says FRS businesses must leave the scheme if they receive reverse charge supplies.

Does DRC affect CIS deductions?

CIS deductions are made on the labour element of the net invoice amount (excluding VAT). DRC doesn't change CIS deduction calculations.

How does DRC affect VAT cash flow?

For subcontractors, DRC prevents the problem of collecting VAT from a contractor who then goes insolvent before paying HMRC. You no longer collect VAT, so there's no VAT cash flow benefit from construction income.

What if I'm using the Cash Accounting Scheme?

The domestic reverse charge is incompatible with the Cash Accounting Scheme for reverse charge supplies. You must use standard (invoice) accounting for DRC supplies.

Are materials covered by DRC?

Yes — if materials are part of a construction service supply under CIS, the whole supply (labour and materials) is covered by DRC. A supply of materials only (without construction services) is not covered.

Do I need to be VAT registered for DRC to apply?

Both the supplier and the customer must be VAT registered. If the supplier or customer is not VAT registered, normal rules apply.

What penalties apply for DRC errors?

Incorrect application of DRC (e.g., charging VAT when DRC applies) can result in assessments and penalties. HMRC has been lenient initially but will enforce compliance.