The introduction of the Domestic Reverse Charge (“DRC”) for construction services has been delayed until April 2021, and we want to make sure all our clients are ready for the changes as there will be no transitional period.

What is it?

The DRC is the governments ‘go to’ measure to combat “missing trader fraud” in the construction sector.

In simple terms for businesses, it is the recipient rather than the buyer who will have to account for the VAT due on certain construction services.  A VAT-registered business which supplies certain construction services to another VAT-registered business for onward sale, will be required to issue a VAT invoice stating that the service is subject to the DRC.  The recipient will then be the one who must account for the VAT due on that supply through it’s VAT return, instead of paying the VAT amount to the supplier.  The recipient may then recover that VAT amount as input tax, subject to the normal rules.

When might it apply?

A customer will have to use the DRC to account for VAT when ALL the following apply:

  • The supply falls within the scope of the Construction Industry Scheme; and
  • The supply is either the standard (20%) or reduced (5%) rate; and
  • The supply is made to a VAT registered person; and
  • That person is registered for the CIS; and
  • That person is not an ‘end user’.

What services will it apply to?

It will apply to almost all construction sectors with a few exclusions:

  • Drilling (minerals, oil or gas);
  • Pre-fabricated building manufacture;
  • Professional services of architects etc; and
  • Security installation.

See the below flowchart to determine if you may be affected by these new rules:




















If you need further clarification or advice then please get in touch.

We strongly advise you to seek appropriate advice before taking action on any of the points listed above.

All information contained in this document are correct at the time of writing.  Legislation and regulations may change at any time.

If you are in any doubt, please call us for clarification.

About us:  Leggate Associates Limited was formed by Andrew Leggate LL.B FCMA FCA CGMA who has over 35 years of tax and accountancy experience in industry and practice, and the practice is managed by Joanne Leggate FMAAT ATT.  Our clients range from building subcontractors to multi-million pound concerns and high net worth individuals all over the UK.  Please see our website  or follow @LeggateAssoc on Twitter for occasional updates.

© 2019 Leggate Associates Ltd