End-User Certificates: Overriding the VAT Reverse Charge

The construction VAT domestic reverse charge, in force since 1 March 2021, is the default for in-scope business-to-business construction supplies between two VAT-registered parties. The supplier does not charge VAT; the customer accounts for it instead. The one clean way to switch that default off is a written end-user notification. Where the customer is the end user of the work and tells the supplier so in writing, normal VAT rules resume and the supplier charges VAT in the ordinary way. That single piece of paper decides who accounts for the tax, whether the supplier keeps the VAT float, and whether either side is exposed to an assessment if HMRC later disagrees.

The mechanics look simple, and that is the trap. The notification has to be in the right form, given at the right time, and held on file by both parties. When the reverse charge does apply and the mechanics of the switch, together with who counts as an end user, are set out in the wider guide to the VAT domestic reverse charge for construction; this looks specifically at the notification that overrides it.

What an end user actually is

An end user is a business, or group of connected businesses, that receives construction services but does not make an onward supply of those services as part of a construction contract. In practice this is the building owner or occupier who is having the work done for its own use rather than to sell on as construction. A property developer building for its own retained portfolio, a retailer fitting out its own stores, a manufacturer extending its own factory: each is typically an end user for that work because it is the final consumer of the construction services, not a link in a construction supply chain.

The distinction that matters is onward supply of construction, not ownership or occupation in the abstract. A main contractor engaged by that developer is not an end user, because it is on-supplying construction services up the chain. The reverse charge is designed to catch exactly those intermediate B2B supplies, and the end-user rule pulls the final customer back out of it.

The written notification and HMRC example wording

The reverse charge does not apply to supplies to end users when the end user tells the supplier in writing that it is an end user. HMRC accepts notification in any written form: on paper, electronically, or within the terms of the contract itself. What matters is that there is a written record showing the supply is to an end user, given at or before the point the supply is made.

HMRC publishes example wording for the notification. It reads: "We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Please issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge." Using this wording is not compulsory, but it removes any argument about whether a valid notification was made. Once the notification is in place, the contractor does not need to chase further detail such as the customer's VAT or CIS registration status before charging VAT normally.

Intermediary suppliers: the second route out

There is a second, less understood, category that can also switch off the reverse charge: the intermediary supplier. An intermediary supplier is a business connected to an end user, or with a relevant interest in the same land, that buys in construction services and then supplies them on to that end user without material alteration. The typical case is a landlord and its tenant, or two companies in the same group, where one buys the construction and recharges it to the connected end user.

Where the intermediary and the end user are connected in this way, the intermediary can make the same written notification and be treated as if it were the end user, so the reverse charge does not apply to supplies made to it. The notification wording mirrors the end-user version but confirms intermediary supplier status. The point of the rule is to stop the reverse charge cascading through connected-party recharges where the ultimate customer is a genuine end user, and it is exactly the kind of recharge that arises around the connected structures examined in the cash-flow impact of the reverse charge on subcontractors.

Timing: the notification has to come first

The notification must be given at or before the time the supply is made. A certificate produced after the invoice has already been raised under the reverse charge does not retrospectively rewrite that invoice. The practical consequence is that the end-user position has to be settled at the contracting stage, not left to be sorted out when the first application for payment goes in.

This is where mixed-use projects go wrong. A customer that is an end user for some works and a contractor on-supplying for others has to be clear which is which, because a single blanket notification covering the wrong supplies will not hold up. The safer approach on a project with more than one supply type is to document the status for each stream at the outset, so the invoicing follows a settled position rather than a guess.

How the invoice and VAT return change once the reverse charge is off

Once a valid end-user notification is held, the supplier reverts to a normal VAT invoice. VAT is charged at the appropriate rate, usually the standard 20%, shown as VAT in the ordinary way, and collected from the customer. There is no reverse-charge annotation, because the reverse charge no longer applies. The supplier accounts for that output VAT on its own return, and the customer reclaims it as input tax under the normal rules.

That is the mirror image of a reverse-charge supply, where the supplier must not enter output tax and instead shows only the net value of the sale, while the customer both declares the output tax and reclaims the corresponding input tax. The switch back to normal VAT is precisely why the end-user position affects working capital: the supplier once again receives the VAT and holds it until the return is due. Getting the treatment right on both sides keeps the reverse-charge tax codes in modern accounting software (Xero, QuickBooks, Sage) aligned with what the paperwork actually supports.

Record-keeping and what HMRC now checks

Both parties should retain the notification as part of their VAT records. The end user keeps a copy of what it sent; the supplier keeps the copy that justifies charging VAT rather than applying the reverse charge. HMRC has been asking to see evidence of end-user notifications during VAT inspections, and a supplier that charged VAT without holding a notification, or a customer that failed to apply the reverse charge without a valid end-user position, is the pattern that draws an assessment.

The exposure runs both ways. Charge VAT the customer was not liable to pay and the customer's input tax recovery can be challenged. Fail to apply the reverse charge where it was due and the supplier can be assessed for output tax it never collected. A clean file of dated notifications, matched to the contracts they relate to, is the difference between a five-minute answer at inspection and a protracted correction exercise. Reviewing that file is a routine part of ongoing HMRC and CIS compliance work for construction clients.

A practical checklist for getting the notification right

1. 1Establish the end-user or intermediary position for each supply stream at the contracting stage, before any invoice is raised.
2. 2Use HMRC's example wording, or wording that clearly mirrors it, referencing section 55A VAT Act 1994.
3. 3Confirm the notification is in writing: a signed document, an email, or an express term in the contract.
4. 4Where you are the supplier billing a mix of customers, consider a contract term assuming end-user status unless the customer states otherwise.
5. 5Keep the notification on file, dated and matched to the relevant contract, on both the supplier and customer sides.
6. 6Re-check the position if the works change scope or a new supply type is added part-way through a project.

Common questions

Does a verbal confirmation that a customer is an end user count?

No. HMRC requires the notification to be in writing. A verbal assurance, or an assumption based on knowing the customer, is not enough to switch off the reverse charge. Without something written and held on file, the supply defaults to the reverse charge.

Who has to make the notification, the supplier or the customer?

The customer, as the end user or intermediary supplier, makes the notification to the supplier. The supplier can prompt it, including through a contract term that assumes end-user status unless told otherwise, but the confirmation of status comes from the customer.

Is the notification a one-off or does it need repeating?

A notification can cover a single supply or a series of supplies under the same contract, provided the end-user position genuinely holds across them. Where a new contract or a materially different supply arises, the position should be reconfirmed rather than assumed to carry over.

Can charging VAT wrongly be corrected later?

Errors can be corrected, but the process is a VAT correction and, depending on the amounts and the periods involved, may need to be disclosed to HMRC. It is far cheaper to settle the end-user position before invoicing than to unwind incorrectly charged or omitted VAT after the fact.

The end-user and intermediary rules are set out in HMRC's manual on end-user and intermediary supplier notifications, and the professional position is summarised in the ICAEW guidance on VAT and the construction sector. If you are unsure whether a customer is an end user, or you have been charging VAT without holding notifications, send the contracts through the form on this page and we will review the position before your next return.