VAT returns for construction firms
We prepare your VAT return each quarter with the reverse charge applied to every invoice. You check it and say yes, then we file it with HMRC.
Why a construction VAT return is harder
Since March 2021 most construction work between VAT registered businesses comes under the domestic reverse charge, which changes who accounts for the VAT. We check it on every invoice, on sales and purchases, to catch these three mistakes.
Charging VAT when you should not
On a reverse charge sale you charge no VAT. If you add 20% anyway, your customer has paid you money they cannot reclaim. That means a credit note, a corrected invoice and an awkward conversation with a customer who may still be holding your retention.
Not charging VAT when you should
The reverse charge does not apply to an end user, and a customer only counts as an end user if they confirm it in writing. Treat an end user's job as a reverse charge sale and the VAT was yours to collect. You still owe it, even though the job has already been invoiced without it.
Missing the reverse charge on purchases
On a reverse charge purchase you account for your subcontractor's VAT and reclaim it on the same return. Miss it and two boxes on the return are wrong, and that kind of mismatch can lead HMRC to look at your return more closely.
Want the rule itself explained? Read how the reverse charge works. The checker on that page tells you whether it applies to a particular invoice. Both are free and need no email address.
Who does what each quarter
We do everything except approving the return and paying HMRC. Unlike CIS, we file the VAT return for you once you have approved it.
A VAT quarter once we take it over. The return and the payment are both due one calendar month and 7 days after the period ends.
| When | What happens | Who does it |
|---|---|---|
| Through the quarter | Sort your sales and purchases as they come in | Us |
| Invoice by invoice | Apply the reverse charge where it applies, on sales and purchases | Us |
| Quarter end | Prepare the return and check it against your books | Us |
| Before it is filed | Check the return and approve it | You |
| 1 month and 7 days after quarter end | File the return with HMRC | Us |
| Same deadline | Your payment must reach HMRC | You |
From 1 April 2029, VAT invoices between VAT registered businesses are set to be e-invoices sent through software, so a PDF will not count (needs Parliament to pass Finance Bill 2026-27); who is covered and any exemptions come later in regulations. From April 2029 you are also set to need a Direct Debit in place for VAT, with some exceptions, though you can still pay another way before a cut-off date (a plan, could change).
What a late VAT return costs
Since 1 January 2023, late VAT returns get penalty points instead of a single fine. You get a point for each late return. Once you reach the limit for how often you file, you get a £200 penalty, and another £200 for every late return after that.
How many points before a penalty, by how often you file.
| How often you file | Points before a penalty |
|---|---|
| Monthly | 5 |
| Quarterly | 4 |
| Annually | 2 |
A nil return counts too. Even if you have nothing to pay and nothing to reclaim, you still have to file, and a late one still gets a point. We prepare and file your nil returns as well, once you approve them. CIS returns work the same way: one is due every month, even if you paid no subcontractors.
Paying late is a separate penalty. HMRC charges interest from the first day your payment is overdue, and a late payment penalty that goes up after 16 days and again after 31 days. That is why you get the amount and the date with every return we send you.
What stays with you
You approve the return before we file it
We send you the return with the figures and the working behind them. Nothing is filed until you say yes, and if a figure looks wrong, we check it before it goes.
You pay HMRC
We tell you the amount and the date it must clear by. You pay from your own account.
You tell us about anything unusual
For example, a job where the VAT treatment changed part way through, a customer who says they are an end user, or a large one off purchase. We will ask, but you know the details, and they change the return.
What we do not do
- Advise you on VAT schemes, when to register or tax planning. We are bookkeepers, not tax advisers.
- Represent you to HMRC. We give you the working behind every figure, so any question is easy to answer, and we help you gather what HMRC asks for.
- Do your year end accounts or corporation tax. Your accountant does those.
- Decide whether a customer is an end user. The customer has to confirm that in writing, and we tell you when it is missing.
You can have VAT done alongside our monthly bookkeeping, which covers your bank, VAT and CIS in one fee. If your books are behind, our catch-up bookkeeping clears that first.
Common questions about VAT returns
Do you file the VAT return, or do I?
We file it, once you have approved it, using software that works with Making Tax Digital, which is how HMRC requires VAT returns to be sent. This is different from CIS, where we prepare the return and you send it yourself.
Can I do my own VAT return?
Yes. Any VAT registered business can send its own return, as long as it uses software that works with Making Tax Digital. On a construction return the hard part is the reverse charge, on sales and on purchases. We apply it to every invoice, go through the return with you and file it once you say yes.
What if an old VAT return was wrong?
You can correct errors from the last 4 years. If the net error (the VAT you underpaid minus any you overpaid) is £10,000 or less, or up to £50,000 and under 1% of your total sales, it goes on your next return. Anything bigger, or anything deliberate, has to be reported to HMRC separately. If we find an error when we take over, we tell you which applies. We prepare the correction. For VAT we file it once you approve it. Separately, from 1 April 2028, a new general duty is set to require taxpayers to correct inaccurate tax returns and documents once they know they are wrong (needs Parliament to pass Finance Bill 2026-27); which returns it covers will be set out in the Finance Bill.
Can you take over part way through a quarter?
Yes. We pick up your transactions from the start of the current VAT period and check back to your last filed return, so the first return we prepare is complete.
I am on the Flat Rate Scheme. How does that work with the reverse charge?
HMRC says reverse charge supplies are not accounted for under the Flat Rate Scheme. Sales you make under the reverse charge are left out of your flat rate turnover, and purchases you receive under it are accounted for and reclaimed on the return in the normal way. If a lot of your work is under the reverse charge, that can change whether the scheme is worth being in. We will point it out if we see it, but whether to leave the scheme is a decision for a tax adviser.
What if I am not VAT registered yet?
You must register once your taxable turnover for the last 12 months goes over £90,000, or as soon as you expect it to go over £90,000 in the next 30 days alone. Count every job at its full invoice value, labour and materials, before any CIS deduction, even though there is no VAT on your invoices yet. Work you buy in from other subcontractors does not count. Whether to register early is a question for a tax adviser, and once you are registered we can do your returns from the first one.
What if HMRC opens an enquiry?
You have the working behind every figure on every return, so you can give HMRC the documents they ask for, and we help you gather them. Arguing your case in an enquiry is a job for an accountant or tax adviser, and we will tell you if it gets to that point.
Can you do my CIS returns as well?
Yes. CIS and VAT often involve the same invoices, and the reverse charge only applies to work that falls under CIS, so it makes sense to have both done together.
Not registered yet? What counts toward the VAT threshold and how to register for VAT.
Primary sources and further reading
Everything on this page is drawn from HMRC's own published guidance.
- VAT domestic reverse charge for building and construction servicesHMRC (opens in a new tab)
- VAT reverse charge technical guideHMRC (opens in a new tab)
- Send a VAT ReturnGOV.UK (opens in a new tab)
- Penalty points and penalties if you submit your VAT Return lateHMRC (opens in a new tab)
- Register for VATGOV.UK (opens in a new tab)
- Charge, reclaim and record VATGOV.UK (opens in a new tab)
- Budget 2026: Overview of Tax Legislation and Rates (OOTLAR)GOV.UK (opens in a new tab)
- E-invoicing requirementsHMRC (opens in a new tab)
- Roadmap for e-invoicing implementationHMRC (opens in a new tab)
Hand over your VAT returns
When you join, send us one invoice you are unsure about and we will tell you whether the reverse charge should have applied. Then we give you a price for your VAT returns. Join the waitlist for 2027.