Reverse charge invoice example: how to write one for construction work

What does a reverse charge VAT invoice look like?

Like an ordinary VAT invoice whose VAT is shown but not charged. Here is one, worked through: a fictional electrician rewires a unit for a VAT-registered main contractor who reports the job under CIS. The work comes to £2,400.00 before VAT, the invoice asks for £2,400.00, and it names £480.00 of VAT that the contractor pays to HMRC instead. HMRC's own example follows it.

INVOICE INV-0042
From: [Your business name and address]
Your VAT registration number: [your VAT number]
To: [Contractor's name and address]
Contractor's VAT registration number: [their VAT number]
Invoice date and tax point: 14 October 2026
Work: rewire of unit 4 at [site address], finished 10 October 2026

Note on the invoice: Reverse charge: customer to pay the VAT to HMRC. VAT at 20% under the reverse charge: £480.00.

That note does two of the three things HMRC asks of a reverse charge invoice: it says the reverse charge applies and the customer accounts for the VAT, and it states how much. The table does the third, by leaving the £480.00 out of the amount due.

The £480.00 is 20% of the whole £2,400.00, because materials supplied with the work are inside the reverse charge. The contractor declares it on their own VAT Return and, usually, claims it back on the same one, so the money never moves.

HMRC's own reverse charge invoice example

HMRC publishes one sample invoice, as a document linked from the invoices section of its technical guide. It is addressed from a subcontractor (the supplier) to a contractor (the customer), with both VAT registration numbers, an invoice number and a date at the top. Its lines, laid out as HMRC lays them out:

Beneath the lines, a footnote begins "Customer to account to HMRC for the reverse charge output tax" and goes on to say that tax is due on the VAT-exclusive price of each line marked reverse charge, at the rate shown against it.

Read against HMRC's three duties, it shows how little the layout matters. "Reverse charge applies" sits where the VAT amount would go, so every line names the rule it is under. Gross equals net, which is how the VAT stays out of the amount charged. And the footnote tells the customer they account for the VAT.

It gives each line's rate rather than a VAT amount. The guide asks for the amount, or the rate where the amount cannot be shown; the example at the top of this page gives both, which is never wrong.

Its two rates are the other thing worth seeing. Refurbishing commercial premises is standard rated at 20%, and converting offices into homes is reduced rated at 5%. The reverse charge covers both, so one invoice can carry both, each line at its own rate. HMRC's sample is Crown copyright, used under the Open Government Licence v3.0.

What wording does HMRC require on a reverse charge invoice?

The words "reverse charge", a note that the customer must account for the VAT, and the VAT figure (or the rate) kept out of the total. On top of that, everything an ordinary VAT invoice has to show.

HMRC's technical guide, last updated on 18 September 2024 and read again on 15 October 2026, puts it as three duties. Show all the information a VAT invoice needs. Make it clear the domestic reverse charge applies and that the customer must account for the VAT. And state how much VAT is due under the reverse charge, or the rate if the amount cannot be shown, without including it in the amount charged.

A reverse charge invoice still shows the VAT. It just does not ask for it.

The words themselves

The VAT regulations require the reference "reverse charge" on the invoice. HMRC gives three examples of wording that meet that requirement:

The plain one is the one your customer's bookkeeper will understand without looking anything up, and it is the one in the example above. Section 55A of the VAT Act 1994 is the part of the law the reverse charge sits in, which is why the other two name it.

If you cannot work the VAT figure out on the invoice, HMRC's guide covers that too: write "customer to account to HMRC" and make sure the customer can tell which lines the reverse charge covers.

The rest of a VAT invoice

The reverse charge sits on top of the ordinary list in paragraph 16.3.1 of VAT Notice 700: a unique sequential number, the tax point, the date of issue if different, your name, address and VAT number, your customer's name and address, a description of the work, and for each line the quantity, the rate of VAT and the amount excluding VAT. The VAT invoice guide goes through that list line by line.

When does the reverse charge apply to my invoice?

When you are both VAT registered and the job is reported under the Construction Industry Scheme. Then your customer, not you, pays the VAT on your work to HMRC, and your invoice has to say so.

That is the VAT domestic reverse charge for building and construction services. It has applied since 1 March 2021, and HMRC's guidance for suppliers sets out when you must use it. All of these have to be true:

The Construction Industry Scheme, CIS for short, is the one where a contractor takes a deduction from a subcontractor's pay and passes it to HMRC. If that is how you are paid, you are almost certainly on the inside of this rule. HMRC asks you to check your customer's VAT number and their CIS registration before you apply it.

A labour-only subcontractor, who prices the work and is responsible for putting right any defects, is inside the rule. An employment business supplying workers, who bills hours on a timesheet while the customer runs the job, is not.

Which work it covers

The list is the same as CIS's list of construction operations: building, altering, repairing, extending or demolishing buildings and structures, installing heating, lighting, power, drainage, water or fire protection systems, painting and decorating, and the site work that goes with them, such as scaffolding, excavation and foundations.

HMRC rules some work out when it is supplied on its own: the professional work of architects and surveyors, installing security systems such as alarms and CCTV, installing seating, blinds and shutters, signwriting, artworks, and making or delivering materials without fitting them. For those you charge VAT the ordinary way.

Who is outside it

A homeowner, for a start. They are not VAT registered, so you charge VAT the ordinary way. So is an end user: a business that uses the building work itself rather than selling it on, like a shop having its own premises refitted. An intermediary supplier, such as a landlord passing work on to its own tenant, can be treated the same way.

Both have to tell you in writing, by letter, email or in the contract, according to HMRC's technical guide. Until they do, HMRC says you still apply the reverse charge if everything else in the list is true, even if you are sure they are an end user.

CIS invoice example: the same job with the deduction

On a CIS job the contractor also holds back 20% of your labour for HMRC, if you are registered and verified. On the invoice above that is £380.00, so the payment that arrives is £2,020.00, and the reverse charge VAT is not part of the sum at all.

GOV.UK's guide for subcontractors says contractors do not take CIS deductions from VAT, from materials you paid for, from plant hired for the job or from consumables. That is why the materials are a line of their own: the deduction is worked out from the labour line, so a split that is clear on the invoice is a deduction nobody has to argue about.

The deduction rates are 20% if you are registered for CIS and the contractor can verify you, 30% if either is not the case, and nothing at all with gross payment status. The contractor sends you a payment and deduction statement each month, and the deduction counts towards your tax bill rather than being lost. The CIS invoice guide works through that half on its own.

What are the common reverse charge mistakes?

Most come from treating the reverse charge as a rule about customers you like rather than a test with six parts. Each of these is answered, in so many words, in HMRC's guidance.

Charging VAT anyway, to be safe

It is not the safe option. When all the conditions are met, HMRC's guidance says you must use the reverse charge, and a VAT invoice charging 20% to a contractor who should be accounting for it themselves is the wrong document.

Leaving out the VAT figure, or the rate

"Reverse charge" alone is not enough. The invoice has to state the VAT due under the reverse charge, or the rate where the amount cannot be shown.

Assuming a business customer is an end user

Without written notice from them, you apply the reverse charge. The notification is theirs to give, and HMRC adds that a notification made wrongly leaves the customer liable for the VAT.

Splitting the materials onto their own invoice

HMRC says labour and the materials supplied with it should not be separated to avoid the reverse charge, and that on a single supply and fix order it applies to the full value even if you issue separate invoices. A separate line is right for CIS; a separate invoice does not take the materials out of the reverse charge.

Working out the 5% disregard invoice by invoice

Where the reverse charge part of a supply is 5% or less of its value it can be disregarded, but only if you and your customer agree it at the start on the contract values. HMRC says it should not be calculated invoice by invoice.

Using it on zero-rated new build work

The reverse charge is for standard and reduced rated work, so zero-rated work on new build housing is outside it. Standard-rated services supplied for new build housing are inside it unless the customer is an end user, and HMRC's section on new build housing lists the exceptions either way.

Putting the VAT on your own return

As the supplier you enter the net value of the sale and no output tax. Two schemes change too: you cannot use the Cash Accounting Scheme for reverse charge supplies, and Flat Rate Scheme users leave them out of the flat rate calculation. With no VAT coming in, HMRC also lets you move to monthly returns. How any of that applies to you is a question for whoever does your books.

Reading the wrong notice

VAT Notice 735 is also called the domestic reverse charge, and it is about mobile phones, computer chips, wholesale gas and electricity, and telecoms. The construction rule is the technical guide linked throughout this page.

How do I write a reverse charge invoice in Invoice Koi?

By hand, in two steps. Invoice Koi has no reverse charge setting and no CIS feature, so you switch VAT off on the lines and write the wording yourself. It takes about a minute, and the PDF says what HMRC asks it to.

Take the VAT off the lines

Each line on an Invoice Koi invoice has its own VAT switch. Turn it off on every line and the line prints "no VAT" beneath it, and the invoice's VAT row comes to nothing, so the total is the net figure. That is the "do not include the VAT in the amount charged" part done.

"no VAT" is the app's wording, not HMRC's. It cannot print "reverse charge" against each line the way HMRC's sample does, which is why the note below has to name the reverse charge and the rate.

Write the wording in the note

Then open "Note on the invoice" and type the reverse charge sentence with the VAT figure in it. The note prints on the PDF below the totals, on this invoice only, so a homeowner's invoice written straight after it is untouched.

Invoice Koi does not work out that VAT figure for you. It is 20% of the net for standard-rated work. If you would rather not type an amount, HMRC's guide allows the rate instead: write "customer to account to HMRC" and make sure the customer can tell which lines the reverse charge covers.

What it does not do

It does not check your customer's VAT number or CIS registration, decide whether the reverse charge applies, or keep an end user's notice for you. It has no CIS deduction of its own and does not produce payment and deduction statements. The general withholding line can show a deduction on an invoice that is all labour, and the CIS invoice guide explains when to use it and when to write the deduction in the note instead.

Everything else on the document is the ordinary invoice: your details, the contractor's, a unique number, the date, the work. The sole trader invoice guide goes through those parts one at a time.

Written up by trade: electricians, plumbers and builders, each with the lines that trade bills, and the electrician invoice template if you want the lines on a page today.

Asked before the first one