VATREVCON33300 - How the construction reverse charge works: End users and intermediary suppliers: Intermediary suppliers

Intermediary suppliers are VAT and CIS registered businesses that are connected or linked to an end user, and are resupplying specified supplies they receive to that end user without material alteration or further processing, as set out in SI 2019/892 art. 2(1).

If a trader buys construction services and re-supplies them to a connected or linked end user, without making material changes to the supplies, they qualify as an intermediary supplier and can be treated in the same way as an end user for the purposes of the construction reverse charge. The reverse charge will therefore not apply to the supply to the intermediary, nor to the supply from the intermediary to the end user, provided both have notified their immediate supplier of their end user or intermediary status.

To be connected or linked to an end user, they must either (as defined in SI 2019/892 art. 2(2)):

  • have a relevant interest in the same land where the construction works happen – such as a landlord and tenant (further explanation of 'relevant interest' can be found below)
  • be part of the same corporate group or undertaking – 'undertaking' is defined in section 1161 of the Companies Act 2006.

The reverse charge does not apply for supplies to intermediary suppliers where they notify their supplier of their status in writing. Once an intermediary supplier notification has been made it is not necessary for the contractor to ask for any further details like VAT and CIS registration status.

Intermediary suppliers can refer to themselves as end users when notifying their suppliers.

For example, a business (A) may buy in specified supplies and then recharge these supplies to another member of their corporate group (B). In this scenario, A is the intermediary supplier and B is the end user. B notifies A of its end user status, and A notifies its immediate supplier of its intermediary status (and may refer to itself as an end user rather than an intermediary when doing so). The reverse charge does not apply to the supply received by A. It also does not apply to the supply from A to B.


Relevant interest

A 'relevant interest in the building or land' means an interest in, right over or licence to occupy the building or land (or any part of it).

Landlors, lessors, licensors, tenants, lessees, or licensees and any persons 'connected' to them could have a relevant interest in land. An agreement for lease also creates a relevant interest in land. Contractors also often get certain legal rights of access during the build; however these rights do not qualify as a ‘relevant interest’ and therefore do not allow them to be treated as intermediary suppliers (SI 2019/892 art. 2(2)(b)(ii)).

Temporary rights include a lease where the intention of the leaseholder is to do a development for a third party and the leaseholder is not going to occupy the building or land. Sometimes a supplier may be granted a long lease (i.e. ten years) to do works for their customer. This is still a temporary interest as there is no intention to create a proper leasehold interest.


Design and build companies as intermediary suppliers

Under a design and build contract, the design and build company will both:

  • buy in building and construction services from multiple suppliers
  • offer those services as a single supply to the client of a designed and built building.

If the conditions to be an intermediary supplier are met, the design and build company is not treated as carrying out material alteration or processing of the services it buys in. This means it can be treated as an intermediary supplier of building and construction services. This also includes supplies such as scaffolding which are integral to the design and build but are not supplied onwards.


A design and build company can be a connected party or linked to an end user. Normal VAT rules would then apply to supplies bought in, subject to intermediary supplier / end user notification.

If the design and build company is not a connected party of or linked to an end user, it will not be regarded as an intermediary supplier, and the reverse charge will apply to construction services bought in for onward supply.