VAT Reverse Charge for Building and Construction Services Manual

VATREVCON42000 - Compliance issues: Checks on traders who supply specified services

A supplier who has taken reasonable steps to establish that the reverse charge should apply is not required to account for VAT if the customer fails to apply the reverse charge. Similarly, where VAT has been charged and paid erroneously, officers will have to consider penalties against the customer and one consideration will be whether there has been a tax loss.

It is important to note that a supplier may not be able to independently check whether or not their customer is required to report payments under the Construction Industry Scheme.

Where the construction reverse charge has been applied for supplies not in scope (end user notification received, customer not required to report payments through the CIS, supply of staff etc.), an assessment will need to be raised for VAT due, and the supplier will have to raise VAT invoices to relevant customers.

Where VAT has been wrongly charged for supplies that should have been covered by the construction reverse charge, normal error correction rules apply.