VAT Reverse Charge for Building and Construction Services Manual

VATREVCON32300 - How the construction reverse charge works: Who needs to apply the construction reverse charge: The CIS and VAT Groups

The test for being a ‘contractor’ under the CIS applies on an entity-by-entity basis; there is no 'group' concept for CIS purposes. Supplies that come under the CIS usually come under the construction reverse charge (subject to the exceptions laid out in VATREVCON21000) and supplies that do not come under the CIS do not come under the construction reverse charge.

As VAT grouping does not impact whether or not a single business exceeds the £3m for the purposes of the deemed contractor rules under the CIS, it similarly does not have an impact on the construction reverse charge. For example, two members of a VAT group, who are not construction businesses and whose expenditure on construction operations is £2.5m each, are not subject to the reverse charge as the two amounts are taken separately.

Supplies where both the supplier and the customer are members of the same VAT group may be reported under the CIS, but these will not be subject to the construction reverse charge as they are disregarded under VAT Act 1994 s.43(1)(a).