About reverse charge VAT

What is reverse charge VAT and when to use it. This covers

What is reverse charge VAT

With reverse charge VAT, it's the responsibility of the customer, rather than the supplier, to charge VAT and report it on the VAT return.

When you sell goods or services to another VAT-registered business, you usually include VAT on your invoice. You then report for this on your VAT Return.

With reverse charge, you do not charge VAT on the sales invoice. The business buying the goods or services declares both the output and input VAT.

Tip: Make sure on the invoice you specify the VAT value and that reverse charge rules apply.

For further information about reverse charge VAT, check with HMRC.

When to use reverse charge VAT

You can use reverse charge VAT in the following situations if you

  • Buy services from a business based outside the UK, such as Google or Facebook, which are based in Ireland.

    See Purchase services from an overseas business (UK)

  • Buy goods from outside the UK. This is also known as postponed accounting.

    See Postponed accounting for Great Britain businesses

  • Buy and sell some specified goods and services, mainly mobile phones, and computer chips. This is known as Domestic Reverse Charge VAT.

    See VAT domestic reverse charge VAT for mobile phones and computer chips

  • Buy and sell services reported under the Construction Industry Scheme. Under the CIS scheme, contractors buying from subcontractors must account for VAT.

    See Reverse charge VAT and CIS.

How reverse charge applies to the VAT return

The VAT is recorded as both a sale and purchase on your VAT return, effectively cancelling each other out.

If you have selected Standard or Lower Rate, the VAT amount shows in

  • Box 1 - VAT due in this period on sales and other outputs

  • Box 4 - VAT reclaimed in this period on purchases and other inputs.

The net amount shows in

  • Box 6 - Total value of sales excluding VAT

  • Box 7 - Total value of purchases and all other inputs excluding any VAT.

Related articles

VAT domestic reverse charge VAT for mobile phones and computer chips

Reverse charge VAT and CIS

Purchase services from an overseas business (UK)