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Introduction
UK Reverse Charge VAT, means that a business customer is responsible for adding 20% output VAT to the net amount of a supplier's invoice for services and including the amount on their UK VAT return. 
There are two aspects of reverse charge VAT as follows:

• International 

• Domestic

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International
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Applies to both sales and purchases of services (outputs and Inputs). 
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Reverse Charges Applied to Sales / Outputs
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Where a UK VAT registered supplier supplies services to a non UK customer and the services would normally be subject to VAT in the UK,  the supplier would not include UK VAT on their invoice to the customer as the supply is outside the scope of UK VAT.  Instead the supplier would write the words "reverse charge applies" on the invoice and as such this would inform the customer that they may be required to self account for VAT in their local jurisdiction.  So for example a UK consultancy firm invoicing a business customer in France where the French customer would have to pay French Reverse Charge VAT on the total value of the invoice to the French Tax Authorities.    
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Reverse Charges Applied to Purchases / Inputs
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Where a UK VAT registered business purchases services from a non UK supplier primarily to be consumed in the UK, they will have to self account for reverse charge VAT at 20% to HMRC based on the total value of the invoice from the non UK supplier.  The main purpose here is to ensure UK businesses that purchase services from UK suppliers are not placed at a disadvantage to businesses that source services from non UK suppliers and save 20% UK VAT. 
 
Note historically, where a UK business customer purchases services from a non UK supplier (which are not subject to the special place of supply rules) and they are not registered for VAT in the UK, then reverse charge VAT will not be applicable.  However the purchasing businesses will be required to add the value of the overseas supply to its UK taxable supplies to determine if they are over the £90,000 VAT registration threshold. If this results in them exceeding the threshold, then they will be required to register for VAT.  However see Reverse Charge Reform paragraph below with new rules being introduced from 1 April 2027.  
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How it works - The UK VAT Registered business customer will have to include 20% VAT applied to the total value of the overseas invoice on their VAT return in Box 1 (VAT Payable).  For example if a business seeks legal advice from a supplier based in France and the total value of the invoice is £1,000, then the UK business customer will have to self account and pay £200 output VAT to HMRC.  However the UK business customer will be able to recover all or some of this VAT from HMRC and can either put the same VAT figure as in Box1 in box 4 (Input VAT Recoverable) on their VAT return or a portion of the VAT based on a specific percentage they are allowed to recover.  If the business only makes taxable supplies to their customers, then they will be able to recover the reverse charge payable to HMRC in full and as such the effect would be a nill payment to HMRC as amounts in box 1 (VAT Payable) will equal box 4 (VAT Recoverable) on their VAT return.  Where the purchaser is a partial exempt business (see how VAT works button), it will only be able  to recover a portion of the reverse charge VAT from HMRC depending on the purchasing businesses Partial Exemption Recovery Rate.   
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Note: Most services purchased from non UK suppliers by UK VAT registered businesses will be in scope of reverse charges unless they are: 
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• Property related (Land and Buildings) transactions including hotel bills for non UK stay

• Admission to non UK events

• Transport related such as taxis while travelling on business abroad. 

• Services that would normally be Exempt in the UK like Financial Services such as insurance, the purchase of shares.

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Services purchased from non UK suppliers such as the ones below will all be Reverse Chargeable in the UK at 20%. (The list is not exhaustive)

• Accountancy Services

• Consultancy Services

• Legal Services

• Supply of staff or contractors

• Advertising

• IT Services

• Marketing

• Software

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The effect of the reverse charge is that a taxable supply is deemed to be made by the recipient of the service in the UK in the course of furtherance of business. The customer accounts for the output tax as if they had a made the supply themselves. The VAT may also be recovered as input tax subject to the normal rules.
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In terms of the supplier, the service is disregarded and so they do not need to account for any output tax and it does not count toward their total taxable supplies in the UK for the purpose of registration (see VATPOSS14700).
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Where a supplier has establishments in more than one country they are regarded as belonging in the country from where the supply is made (see VATPOSS05000).
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Therefore the reverse charge may still apply for services supplied to UK customers even if the supplier has a UK establishment. For example, where the establishment making the supply is an overseas branch or agency and the UK establishment does not intervene in the supply (see VATPOSS05100).
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Reform of the Business to Business Reverse Charge for Supplies of Services from Overseas 28 Oct 2026
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From 1 April 2027, new rules will apply to services purchased from non UK suppliers and will mean that the reverse charge only applies when the purchasing business is actually registered for VAT in the UK. Where the purchasing business is not VAT registered, the supplier will be required to charge VAT to the customer and account for it to HMRC. 
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Domestic
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Domestic reverse charge is similar to International Reverse Charges in that the customer is required to self account for VAT.  The difference is that domestic reverse charges applies to specified transactions between UK to UK businesses.  The main aim here is to prevent / reduce, eliminate fraudulent traders who set up companies, issue VAT invoices for goods and collect the VAT and fail to declare this to HMRC.  (Basically the responsibility for paying output VAT is switched from the supplier to the customer) 
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How it works - Invoices issued by VAT registered UK Business Suppliers to VAT registered UK Business Customers will show the net amounts only and no VAT applied.  On receipt of these invoices for services, the UK business customer will self account for VAT at 20%.  The customer will be responsible for paying this VAT to HMRC and if they only make taxable supplies in their business, they will be able to recover this VAT and in effect there will be a nil payment due to HMRC.  So box 5 VAT payable / recoverable will be zero. 
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For Example - if a UK subcontractor in the construction industry invoices its main UK contractor for services which are covered by the Construction Industry Scheme, for £100,000 then their invoice to the contractor will only show £100,000 and carry the words "reverse charge applies".  The UK subcontractors VAT return will only include £100,000 sales in box 6 on their VAT return. 
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The UK contractor will then have to self account for £20,000 of Output VAT on their VAT return under the CIS reverse charge VAT procedure by including this amount in Box 1 (VAT payable) on their VAT return.  Additionally the contractor (if they only make taxable supplies (standard and zero rated supplies) can recover this £20,000 from HMRC by including the amount in Box 4 on their return. This means their box 5 payable amount will be zero. 
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However the UK contractor will also need to include the net amounts £100,000 in both Box 6 & 7 on their VAT return. 
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Than Following Services are in scope of UK Domestic Reverse Charges:
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• Mobile Phones 

• Computer Chips

• Wholesale Gas and Electricity (not Gas and Electricity to retail consumers)

• Wholesale Telecommunication Services

• Construction Industry (Construction Industry Scheme Contactors)

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For more information please read:
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Domestic reverse charge procedure (VAT Notice 735)
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