The construction domestic reverse charge (DRC)
Updated 2026-09-25
If you're VAT registered and invoice a VAT-registered contractor for construction work, HMRC usually wants you to use the domestic reverse charge instead of charging VAT in the normal way.
When to use it
Use a Reverse charge rate when all of these are true:
- You're VAT registered.
- The customer is also VAT registered and is CIS-registered as a contractor (mark them as a CIS contractor on their contact).
- The customer isn't the end user of the building — they're going to sell or lease it on, or use your work as part of their own construction services to someone else.
If the customer is the end user (for example, a homeowner, or a business having work done on its own premises to occupy), charge VAT normally instead.
BusyBee Hub only offers the reverse charge rates on a sale once your own CIS status is set to registered, unregistered or gross — it isn't offered to businesses with no CIS status, since the reverse charge is a construction-industry rule.
What your invoice shows
Pick Reverse charge 20% or Reverse charge 5% as the line's VAT rate, matching the rate that would otherwise apply. BusyBee Hub then:
- Charges no VAT on the line — the amount due is the net amount only.
- Prints "Reverse charge: customer to account for VAT to HMRC" on the invoice, its PDF and the email your customer receives, along with the VAT they need to self-account for.
- Puts the net amount in box 6 of your VAT return, but not in box 1 — you don't declare or pay this VAT yourself.
Your customer then adds that VAT to their own box 1 (output VAT) and reclaims it in box 4 (input VAT) on their own return, per HMRC's reverse charge technical guide.
Purchases: a reverse-charge bill or expense
If a sub-subcontractor sends you a reverse-charge bill (or you record one as an expense), pick the same Reverse charge rate. BusyBee Hub self-charges the VAT on your behalf: the notional VAT is added to box 1 (output VAT) and box 4 (input VAT) of your own return, and the net cost goes in box 7 — so the reverse charge nets out to no VAT cost for you, exactly as it should.
Flat Rate Scheme
Reverse-charge sales are kept out of your flat-rate turnover — you never pay flat-rate VAT on them, though they still count towards box 6. A reverse-charge purchase is still self-charged and reclaimed in full, even though the Flat Rate Scheme normally blocks reclaiming VAT on purchases.
If BusyBee Hub thinks you've missed one
If you charge standard or reduced-rate VAT to a contact marked as a CIS contractor, BusyBee Hub shows a note on your VAT return asking "Should this be reverse charge?" It's just a prompt — check the invoice and change the rate if it should have been reverse charge.