Reverse Charge and End User Rules: A Cash-Flow Opportunity for Builders

Man in a yellow cap and purple shirt laying bricks, focused on his task. Green trees in the background, daytime setting.

If you sell construction services to other builders, you may have already heard about the domestic reverse charge rules. These rules sound complicated, but they don’t have to be. Let’s break them down in plain English and see how they could even give your business a cash-flow advantage.

What Is the Reverse Charge?

The reverse charge is a VAT rule designed to stop fraud in the construction industry. Normally, you’d add VAT (5% or 20%) to your invoice, and your customer would pay you the full amount, including VAT.

But with the reverse charge, things flip:

• You don’t add VAT to your invoice.

• Your customer declares the VAT on their own VAT return instead.

This means there’s no chance of a builder charging VAT, pocketing it, and disappearing without paying HMRC.

When Does It Apply?

The reverse charge applies if:

• Both you and your customer are VAT-registered.

• Your customer is registered under the Construction Industry Scheme (CIS).

• Your customer will be selling on your services as part of their work (for example, a subcontractor working for a contractor).

👉 If the work isn’t covered by CIS (like repairing machinery), the reverse charge doesn’t apply.

What Is an “End User”?

An end user is a VAT and CIS-registered business that buys your services for its own use, not to sell on. For example:

• A property developer hiring you to build a block of flats (they’re keeping the flats, not selling on your building services).

• A business getting a new office built for their own staff.

In these cases, the normal VAT rules apply — you add VAT to your invoice as usual.

Important: HMRC’s latest guidance (April 2025) says it’s the customer’s job to tell you in writing if they are an end user. If they don’t, the reverse charge applies by default.

Why Does This Matter for Cash Flow?

Here’s where it gets interesting. If you can apply normal VAT rules (because your customer is an end user), you collect VAT on your invoices.

That means:

• You get paid 20% more upfront (the VAT amount).

• You only hand that VAT over to HMRC when your VAT return is due — which could be up to 3 months later.

This creates a short-term cash-flow boost. It’s money in your bank that you can use until the VAT deadline.

👉 If you use the cash accounting scheme, you don’t even declare the VAT until your customer has actually paid you — extending the benefit even further.

Practical Tip: Protect Yourself in Contracts

To make life easier, add a clause in your contracts or engagement letters, for example:

“We will assume you are an end user for the purpose of the reverse charge regulations and charge you VAT on our invoices. You must advise us if you are not an end user, and we will apply the reverse charge instead.”

This way:

1. You protect yourself against HMRC questioning your VAT treatment.

2. You get to collect VAT from your customers unless they confirm otherwise — giving you that valuable cash-flow advantage.

Final Thoughts

The reverse charge rules can seem like another layer of red tape, but if you handle them carefully, they can actually work in your favour. By making sure customers confirm their end user status, you can often keep charging VAT — giving your cash flow a healthy boost while staying compliant with HMRC.

At Brian Pusser Accountant, we help construction businesses navigate tricky VAT rules like these, so you can focus on building — not battling paperwork.

👉 Want help making the most of VAT rules for your business? Call us on 01634 319287 or email brian@brianpusser.co.uk