What is the domestic reverse charge for construction?

In practice, in the UK

Where the reverse charge applies, the supplier issues an invoice that states the service is subject to the domestic reverse charge and shows the VAT rate that would otherwise apply, but does not charge that VAT to the customer or include it as output VAT on its own return. The customer, instead, declares that VAT as both output and input VAT on its own return, which is neutral for a fully taxable business but changes the cash flow the supplier would otherwise have held between charging VAT and paying it over. The charge is specific to construction services within the Construction Industry Scheme and does not apply as a general reverse charge across UK trade — it is unrelated to any European cross-border mechanism, since none of those apply in the UK any longer.

In Odoo

Odoo needs a dedicated tax position and invoice layout for reverse charge supplies, since the invoice must state that the reverse charge applies and quote the VAT rate without adding it to the total the customer pays. Applying an ordinary VAT tax position to a reverse-charge sale by mistake results in VAT being charged and collected that should never have appeared on the invoice at all.

Common mistakes

• Charging VAT in the normal way on a construction service that falls under the reverse charge.
• Confusing the domestic reverse charge with a general or cross-border reverse charge mechanism.
• Failing to check whether the customer is themselves within the Construction Industry Scheme before applying the charge.