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HMRC updates guidance on VAT domestic reverse charge for construction


Published: 22 Nov 2022 Update History

Guidance on the supply of scaffolding has been added. Guidance in several other areas has been updated.

Since 1 March 2021, it has been a requirement to account for VAT using the domestic reverse charge for most supplies of building and construction services. A domestic reverse charge requires the UK customer receiving supplies to account for the output VAT due, rather than the UK supplier.

HMRC’s technical guide for businesses buying or selling building and construction services explains how the VAT treatment should apply to various scenarios in more detail.

On 18 November 2022, HMRC updated its technical guide to include a section on scaffolding. The guidance has also been updated in the following areas:

  • reverse charge exemption for end users and intermediary suppliers;
  • how to tell the difference between ‘labour-only’ supplies of construction services and supplies of workers by employment businesses;
  • accounting for VAT where construction services are supplied or received together with other goods or services;
  • how the reverse charge affects supplies made by and to utility companies; and
  • how non-established taxable persons should account for VAT on construction services.


The guidance confirms the VAT liability of any supply of scaffolding will depend on what is being supplied under the contract in each case. The hire of goods is not a service covered by the domestic reverse charge, but the services of erecting and dismantling the scaffolding would be.

Any VAT due on the hire of scaffolding for new build housing work should be accounted for under normal VAT rules. A contract for the hire, erection and dismantling of scaffolding is within the scope of the Construction Industry Scheme. If the supplier’s invoice shows separate charges for the hire of scaffolding and cost of labour to erect and dismantle it, the labour element will be VAT zero-rated as a service carried out in connection with the construction of a new dwelling.

Charges for the hire of scaffolding alone are not covered by the zero rate and are liable to VAT.

End user and intermediary suppliers

HMRC has added further detail to its guidance on the exemption from the reverse charge for end users and intermediary suppliers, including a number of examples.

The addition of a statement that being an end user is optional is notable. Suppliers should not treat customers as end users without a written statement from the customer that they are an end user.

Labour-only supplies or employment business

The updated guidance removes the conditions regarding who workers or labourers are employed by when determining whether the supplying business is an employment business or a labour-only business.

In addition, the customer’s site foreman, directing and controlling the works carried out by the workers, is no longer considered by HMRC to be a feature of an employment business.

Construction services supplied with goods or other services

The updated guidance confirms that goods supplied with construction services should be treated as a single supply for VAT purposes. As such, the reverse charge applies to the full value of the invoice. There are some concessions outlined in the updated guidance.

Utility companies

HMRC has also clarified the interaction between the reverse charge and work performed by utility companies. If a utility company charges for work to connect, disconnect, reconnect, divert, make safe or cap off parts of its own utility network, this work is generally not within the scope of “construction services” for the purposes of the reverse charge. This is because the utility company is not making onward supplies of construction services. Normal VAT rules will apply to any such charges.

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