1. Introduction
Since March 2021, the UK government introduced the domestic reverse charge VAT for building and construction services. If you work in scaffolding or hire scaffolders, you need to know how the VAT reverse charge scaffolding UK rules apply. This affects how VAT is invoiced, paid, and reported within the construction supply chain.
2. What Is the VAT Reverse Charge?
The domestic reverse charge shifts responsibility for paying VAT from the supplier (e.g., scaffolding contractor) to the customer (the main contractor). Instead of the scaffolder charging and collecting VAT, the contractor must account for it directly in their VAT return.
This measure was introduced to reduce VAT fraud in the construction sector.
3. When Does the VAT Reverse Charge Apply?
The reverse charge applies if:
- Both supplier and customer are VAT-registered.
- Both are registered for the Construction Industry Scheme (CIS).
- The service is within the scope of CIS (scaffolding is included).
- The customer is not the end user (i.e., the final client, such as a homeowner).
4. When the Reverse Charge Does Not Apply
The reverse charge does not apply if:
- The service is provided to an end user (e.g., a homeowner).
- The customer is not VAT-registered.
- The service is outside CIS.
- The scaffolder is supplying materials only (not labour/services).
5. How VAT Reverse Charge Works in Scaffolding
Example:
- A scaffolding firm supplies scaffolding to a main contractor.
- The scaffolder issues an invoice for £10,000 excluding VAT.
- Instead of adding 20% VAT, the invoice states: “Reverse charge: customer to account for VAT to HMRC.”
- The contractor records both output VAT and input VAT in their VAT return, cancelling each other out.
This means the scaffolder does not collect VAT, reducing the risk of fraud.
6. What Scaffolders Must Do
Scaffolding businesses must:
- Check whether their client is VAT and CIS registered.
- Clearly mark invoices with “Domestic reverse charge applies”.
- Exclude VAT from invoices where reverse charge applies.
- Ensure their accounting systems handle reverse charge correctly.
7. What Contractors Must Do
Contractors receiving scaffolding services must:
- Account for VAT on their VAT return as both input and output VAT.
- Ensure they do not pay VAT to the scaffolder where reverse charge applies.
- Keep records to show compliance with CIS and VAT rules.
8. Impact on Cash Flow
- Scaffolders may face reduced cash flow because they no longer collect VAT from customers.
- Contractors may benefit, as they do not have to pay VAT upfront before reclaiming it.
This makes accurate accounting essential for scaffolding companies.
9. Penalties for Non-Compliance
If scaffolding firms or contractors incorrectly apply VAT, HMRC can impose:
- Penalties for incorrect VAT returns.
- Fines and interest charges for underpaid tax.
- Increased scrutiny in future tax audits.
10. Getting Professional Advice
Because VAT reverse charge rules are complex, many scaffolding businesses seek help from accountants or VAT specialists to ensure compliance.
Frequently Asked Questions
1. Does VAT reverse charge apply to scaffolding hire only?
Yes, if supplied as part of construction services under CIS.
2. Do scaffolders still charge VAT to private homeowners?
Yes, because homeowners are end users and not VAT/CIS registered.
3. What wording must be on scaffolding invoices?
Invoices should include: “Reverse charge: customer to account for VAT to HMRC.”
4. How do scaffolders report VAT now?
They issue invoices without VAT and adjust their VAT return to reflect reverse charge transactions.
5. Can a scaffolder still reclaim VAT on materials?
Yes, scaffolders can reclaim VAT on materials they purchase for their business.
6. What happens if a scaffolder wrongly charges VAT?
The contractor may refuse to pay the VAT, and HMRC could penalise incorrect invoicing.
Conclusion
The VAT reverse charge scaffolding UK rules significantly change how VAT is handled in the construction industry. Scaffolders no longer collect VAT from contractors, and contractors must account for VAT themselves. By issuing correct invoices, keeping accurate records, and seeking advice where needed, both parties can avoid penalties and remain compliant.