VAT reverse charge invoice example and wording

What does a reverse charge invoice look like?

Here is one from a groundworker to a contractor for £1,600 of work, with £400 of it materials. Both are VAT registered and the job is under CIS, so the VAT reverse charge applies.

The contractor pays you £1,360 and pays the £240 CIS deduction to HMRC for you. The £320 of VAT is written on the invoice so the contractor can account for it, but it is not in the total and is not paid to you.

That is £320 less in your bank than if you charged VAT normally, though it also means there is no VAT on this job for you to pay over to HMRC.

What must a reverse charge invoice show?

Everything a normal VAT invoice shows, plus a note about the reverse charge and the VAT figure. HMRC’s guide says When supplying a service subject to the domestic reverse charge, suppliers must:

• show all the information required on a VAT invoice
• make a note on the invoice to make it clear that the domestic reverse charge applies and that the customer is required to account for the VAT
• clearly state how much VAT is due under the reverse charge, or if this amount cannot be shown, state the rate of VAT, but do not include the VAT in the amount charged to the customer

Source: HMRC, VAT domestic reverse charge technical guide: invoices

The normal VAT invoice details are the invoice number, the dates, your name, address and VAT number, the customer’s name and address, a description of the work, and the amounts excluding VAT. Our CIS invoice example lists them in HMRC’s words.

A reverse charge invoice is always between two VAT registered businesses, so from 1 April 2029 it is set to be an e-invoice sent through software, and a PDF will not count (needs Parliament to pass Finance Bill 2026-27). Who is covered and any exemptions come later in regulations.

What wording does HMRC accept for the reverse charge?

Any wording that makes it clear the reverse charge applies. HMRC’s own manual (VATREVCON37100) says the precise wording is not prescribed in law. What the law does require is in the guide: The VAT regulations 1995 say invoices for services subject to the reverse charge must include the reference ‘reverse charge’.

Here are examples of wording that meet the legal requirement:

• VAT Act 1994 Section 55A applies
• S55A VATA 94 applies
• Customer to pay the VAT to HMRC

Source: HMRC, VAT domestic reverse charge technical guide: invoices

Any one of the three is enough. Putting “Reverse charge:” in front, as the example invoice does, is how HMRC’s manual writes them too, and it makes the note hard to miss.

How do you show the VAT amount on a reverse charge invoice?

As a separate line that is not added to the total. On the example that line reads £320.00 at 20%, while the total stays at £1,600.00. It tells the customer exactly what to put through their VAT return.

If your invoicing software cannot show the figure, HMRC says If your software cannot show the amount of VAT to account for under reverse charge, you must:

• add wording to the invoice to say ‘customer to account to HMRC’ for the reverse charge
• make sure customer can identify reverse charge goods or services

Source: HMRC, VAT domestic reverse charge technical guide: invoices

What changes on a reverse charge invoice when CIS also applies?

Two things: the reverse charge covers the whole invoice, and the CIS deduction still comes off the labour only. In fact the construction reverse charge only applies where payment for the supply is reported within the Construction Industry Scheme, so a construction reverse charge invoice is always for work paid under CIS.

Materials supplied with the work are part of the same supply for VAT, and HMRC’s guide says The reverse charge applies to the full value of the invoice. That is why both lines on the example are marked reverse charge.

CIS works the other way round. The contractor takes the deduction only from the labour, and never from VAT: HMRC defines it as the amount withheld from a payment (exclusive of VAT) for labour. On the example that is £240 on £1,200, the same deduction as if VAT had been charged. Our CIS invoice example shows the same job with and without VAT side by side.

What does the customer do with a reverse charge invoice?

They pay you the net amount and account for the VAT on their own VAT return. HMRC tells the customer: you’ll have to account for the VAT in your VAT Return and recover it simultaneously on the same VAT Return, subject to the normal rules on VAT input tax deduction.

For a business that can reclaim all its VAT, the two entries cancel out, so there is nothing extra to pay. Which VAT return boxes the figures go in

What if a reverse charge invoice is missing the wording?

The customer still has to account for the VAT, and should ask for a corrected invoice. HMRC’s manual is clear: The liability to apply the reverse charge rests with the customer.

If an invoice should have been reverse charge and is not marked as one, they should go back to their supplier to request an invoice that complies with the above so that the audit trail is corrected on both sides. And The customer is still responsible for applying the reverse charge even if they have not been issued with a reverse charge invoice.

How do you do a reverse charge credit note?

The same way as the invoice: say the reverse charge applies and show the VAT change. HMRC says Issue a credit note to the customer with a note on it to show both of the following:

• that the reverse charge applies
• showing the reduction in the VAT the customer has to pay to HMRC

HMRC’s example wording for a credit note is reverse charge: customer to account for the output tax adjustment of £X to HMRC, with the real figure in place of £X.

Source: HMRC, VAT domestic reverse charge technical guide: credit notes and adjustments

What should an end user notification say?

It has to be in writing, and HMRC suggests this wording. Once your customer has sent it, you invoice them with VAT in the normal way instead of using the reverse charge.

“We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge.”

Who counts as an end user, and how to put it in your terms