VATREVCON27000 - Scope of the construction reverse charge: Zero-rated supplies
Source: gov.uk (2025-04-02)


Supplies of construction in relation to certain types of buildings are zero-rated (VCONST02000 (https://www.gov.uk/hmrc-internal-manuals/vat-construction/vconst02000)), and are excluded from the reverse charge by VAT Act 1994 s55A (https://www.legislation.gov.uk/ukpga/1994/23/section/55A) as there is no VAT to account for. There are no special invoicing considerations in relation to the construction reverse charge where there is a zero-rated supply of construction services reported within the CIS.

Goods excluded from zero-rating

Certain goods (including white goods, carpets, and domestic electrical or gas appliances other than those designed to provide space heating and/or water heating) that may be supplied as part of zero-rated construction services of residential property are excluded from zero-rating (see VCONST13000 (https://www.gov.uk/hmrc-internal-manuals/vat-construction/vconst13000)), meaning that the supply of these goods is charged at the standard rate. However, the reverse charge does not apply because the underlying construction service is zero-rated.

Scaffolding on zero-rated new build housing

For scaffolding supplied for zero-rated construction work, the services of erecting and dismantling scaffolding can be zero-rated (see VCONST02750 (https://www.gov.uk/hmrc-internal-manuals/vat-construction/vconst02750)). However, the hire of such scaffolding is not a specified service within the construction reverse charge and is mandatorily standard-rated, so normal VAT rules apply. Note that this is a change to the previous policy. For a transitional period up to 1 February 2023, businesses could use either reverse charge accounting or normal VAT rules.

With mixed supplies the VAT liability of any supply of scaffolding will depend on what is being supplied under the contract and in determining what a fair apportionment is, the situation should be approached in the same way as a non-reverse charge contract.

Hire of plant or machinery with an operator used on new build housing developments

The supply of operated plant or machinery used on new build housing developments is zero-rated and not subject to the reverse charge.

Supply and fix of goods not ordinarily incorporated in residential conversions and refurbishments

Building and construction services may be liable to the reduced rate of VAT in the case of:
- refurbishment or renovation of residential premises that have been empty for more than 2 years
- conversion of premises from non-residential to residential use and works that result in a change to the number of dwellings in a building.
The standard rate of VAT is due on the supply and fix of goods that are not ordinarily incorporated in residential conversions and refurbishments, and the reverse charge applies. Read section 'Examples of articles not ordinarily incorporated' in VAT Notice 708 (buildings and construction) (https://www.gov.uk/guidance/buildings-and-construction-vat-notice-708#section13) for more information. However, if the customer notifies the supplier in writing that they are an end user, normal VAT rules apply.