When Must You Self-Charge VAT?

Written By Phillip Henwood

Understanding Reverse Charge and Self-Supply Mechanisms

While VAT is typically charged by the supplier, there are situations where you, the customer, must account for VAT instead. These mechanisms — known as the reverse charge and self-supply — help HMRC combat tax avoidance, fraud, and lost revenue.

🔄 What Is the Reverse Charge?

Under the reverse charge, the customer accounts for both output VAT and input VAT on their VAT return. This ensures that cross-border or high-risk domestic transactions are fully reported.

Common situations include:

  • Purchases of services from overseas (e.g. professional, digital, legal, or IP-related services).

  • Domestic construction services under the Domestic Reverse Charge (DRC).

  • Certain high-value goods such as mobile phones and computer chips (over £5,000 in value).

🧾 How It Works in Practice

  • Suppliers issue an invoice with 0% VAT and a note stating the reverse charge applies.

  • Customers must declare output VAT (as if they charged it), and may reclaim it as input VAT if fully taxable.

  • The supply value is included in both the output and input VAT boxes of the return.

🏗 Domestic Reverse Charge in the Construction Industry

The DRC applies to:

  • Building and civil engineering

  • Demolition and installation

  • Repairs, alterations, and hire of plant and equipment

It affects VAT-registered businesses within the construction supply chain — but not end users or non-VAT registered customers, who are excluded from the rule.

🌍 Post-Brexit: VAT on International Goods

Since Brexit, the reverse charge no longer applies to goods from the EU. Instead:

  • Businesses pay import VAT on goods from all non-UK countries.

  • Postponed VAT Accounting (PVA) allows VAT to be declared and reclaimed on the same return, improving cash flow.

Stay Compliant with Confidence

Understanding reverse charge and self-supply rules is vital to ensure VAT compliance — especially when dealing with overseas suppliers, construction services, or high-risk goods.

At 4 Eyes Ltd, we provide tailored advice to help businesses apply VAT correctly, avoid errors, and streamline their VAT returns.

📞 Contact us today for guidance on reverse charge rules in your sector.

Phillip Henwood
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