CIOB QS Technician Practice Exam

The reverse charge shifts the responsibility for paying VAT from the supplier to the customer. In construction services between VAT-registered businesses, the Sub-Contractor does not add VAT to their invoice for the work done for the Contractor. Instead, the invoice is issued without VAT, with a note that the reverse charge applies. The Contractor then accounts for the VAT on their VAT return: they record the VAT as both output tax (due to HMRC) and as input tax (recoverable if they have the right to reclaim). This makes the transaction effectively VAT-neutral for a fully taxable business. This rule is about how VAT is collected in this specific supply chain, not about overseas clients or contract wording. If the Sub-Contractor were to charge VAT, it would undermine the purpose of the reverse charge and complicate recovery.