The construction industry has two separate schemes that are easy to confuse. CIS is about income tax: a contractor deducts money from a subcontractor's labour payment and pays it to HMRC on their account. The VAT domestic reverse charge is about VAT: the customer accounts for the VAT instead of the supplier. They overlap because the reverse charge applies to supplies that are reported under CIS, which is why they are searched for together.
Two schemes, one invoice
On a subcontractor's invoice both can appear at once and they do different things. The CIS deduction reduces the money paid across, and is credited against the subcontractor's own tax. The reverse charge removes the VAT line entirely and hands the VAT accounting to the contractor. A subcontractor who understands one and not the other typically gets the cash flow wrong: under the reverse charge you no longer hold your customers' VAT between invoicing and the return, and if you were relying on that float the change is real.
When it applies
Broadly, where the supply is of construction services reported under CIS, both parties are VAT registered, the customer is not an end user or intermediary supplier, and the supply is standard or reduced rated. Zero-rated construction work is outside it. The end user question is the one that decides most invoices in practice, and it is answered by the customer rather than the supplier, so it has to be confirmed in writing before invoicing rather than guessed from the nature of the job.
What the invoice and the return look like
The subcontractor's invoice shows the net, no VAT, and a statement that the reverse charge applies and the customer must account for the VAT; HMRC's guidance sets out acceptable wording. The subcontractor puts the net into box 6 only. The contractor puts the VAT into box 1 and, if recoverable, box 4, and the net into box 7. Supplies under the domestic reverse charge still count towards the supplier's taxable turnover for the £90,000 registration threshold even though no VAT was charged on them.
Questions people ask about cis reverse charge
Is the CIS reverse charge the same as CIS?
No. CIS deducts income tax from labour payments. The VAT domestic reverse charge moves VAT accounting to the customer. They apply to overlapping supplies, which is why they are confused.
Does the reverse charge apply to zero-rated construction work?
No. It applies to standard and reduced rated supplies reported under CIS between VAT-registered parties where the customer is not an end user.
Who decides whether the customer is an end user?
The customer. They should confirm their status in writing, and the supplier should hold that confirmation before invoicing.