The VAT reverse charge is one of those concepts that sounds esoteric until you realise you've been buying Google Ads or Adobe Creative Cloud for years and probably haven't been declaring it properly. It's not optional, and HMRC inspectors love finding it missed. Here's how it actually works for UK freelancers.
What the reverse charge actually does
Normally with VAT, the supplier (you, if you're selling) charges VAT on top of the price, the customer pays it, and the supplier hands it to HMRC. The reverse charge inverts this: no VAT is shown on the invoice, and the customer self-accounts for the VAT in their own VAT return. The customer adds the notional VAT to Box 1 (as if they'd charged it to themselves) and reclaims the same amount in Box 4 — the two cancel out, but both have to be declared.
It exists for two main practical reasons: to stop overseas suppliers having to register for UK VAT just to invoice UK customers (the international B2B services flavour), and to crack down on missing-trader fraud in construction (the CIS flavour, introduced in 2021).
When you apply the reverse charge as a UK supplier
1. B2B services to overseas business customers
If you supply services to a business customer outside the UK (EU or rest of world), under the "general rule" for services the place of supply is the customer's country — so UK VAT doesn't apply. Instead of charging UK VAT, you note on the invoice that the customer must account for any VAT in their own country under their local reverse-charge rules.
You'll need evidence the customer is a business — usually their VAT number (for EU customers) or other commercial evidence (company website, contracts, business address). The default assumption for individuals is consumer (B2C), which is taxed differently.
2. Construction services under CIS (UK only)
Since March 2021, construction services supplied between VAT-registered subcontractors and contractors in the UK Construction Industry Scheme are reverse-charged. The subcontractor doesn't charge VAT; the contractor accounts for it. This applies to specified building services (most work in construction, alteration, repair, demolition, etc.).
The invoice wording you must use
For both flavours, your invoice still needs all the normal contents (date, sequential number, your VAT number, customer details, description, amount) — but with no VAT line and a clear statement of why. HMRC's accepted wording:
Below the line items, before the total:
VAT: 0.00 (reverse charge — customer to account for VAT in their member state under Article 196 of Council Directive 2006/112/EC).
For non-EU customers, the wording can be simpler: "VAT: 0.00 — outside the scope of UK VAT, reverse charge applies in customer's jurisdiction."
Reverse charge: Customer to pay the VAT to HMRC. VAT rate: 20% (Standard).
You must still show the rate of VAT that would apply and the cash amount of VAT it represents, but explicitly state the customer is responsible for it.
Our VAT invoice template tool includes both reverse-charge wordings as built-in options.
When you apply the reverse charge as a UK customer
Buying B2B services from overseas suppliers
This is the one most freelancers miss. If you're VAT-registered and you buy services from outside the UK in your business capacity (Google Ads, Meta/Facebook Ads, AWS, Cloudflare, Notion, Figma — any of the US/international SaaS giants), the invoice will arrive with no VAT. Under reverse-charge rules, you have to:
- Calculate the notional UK VAT (20% of the net amount).
- Add it to Box 1 of your VAT return (as output VAT).
- Reclaim the same amount in Box 4 (as input VAT) — assuming the purchase is for taxable business use.
- Add the net amount to Box 7 (purchases excluding VAT).
The cash effect is zero (Box 1 in, Box 4 out, same number) — but you must declare both sides. Failing to do so under-reports your turnover indicator (Box 6 / Box 7 ratio) and is a common audit trigger.
Invoice from Google Ireland: £500, no VAT.
On your VAT return:
- Box 1 (output VAT): +£100
- Box 4 (input VAT): +£100
- Box 6 (sales excl. VAT): no change (this isn't a sale)
- Box 7 (purchases excl. VAT): +£500
Net VAT impact: £0. But the declaration must be made.
The VAT return calculator has a dedicated "reverse-charge purchases" input that handles this for you.
Buying construction services as a UK contractor
If you're a VAT-registered contractor in the Construction Industry Scheme and you receive an invoice from a CIS subcontractor with a reverse-charge note, you self-account for the VAT the same way — Box 1 and Box 4 the notional VAT.
The five common mistakes
- Not declaring reverse-charge purchases on the VAT return. The most frequent inspection finding. Even though the net VAT impact is zero, both sides must appear.
- Missing the invoice wording. An overseas B2B sale invoiced as "£0 VAT" with no explanation looks like you've forgotten to charge VAT. The reverse-charge wording proves you applied the right treatment.
- Reverse-charging a B2C overseas customer. The mechanism only applies to B2B. If you sell to overseas consumers, different rules apply (digital services may need to use the EU OSS scheme or charge local rates).
- Forgetting CIS reverse charge applies between contractors and subcontractors. If you're not in CIS or you're providing to the end-customer (not a contractor), normal VAT rules apply.
- Counting Apple App Store / Google Play fees as reverse-charge purchases. These are usually structured as Apple/Google selling to the end-user with you as the developer-publisher — the fees they deduct are commission, not your purchase from them. Check the actual contract structure.
If you're not VAT-registered, the reverse charge as a customer doesn't apply — you can't self-account for VAT you'd have no way to reclaim. As a supplier, you still don't charge UK VAT on B2B sales to overseas customers (you're not registered, so no VAT to charge), but the standard threshold rules still apply: if your taxable turnover (including those overseas B2B sales) crosses £90,000 in a rolling 12 months, you must register.
For EU customers, their VAT number is the cleanest evidence — and you can validate it on the EU VIES portal. For non-EU customers, "commercial evidence" is fine: their company website, business address, references to their incorporation, a signed contract. HMRC accepts a reasonable approach if you've taken proper care.
Zero-rated means VAT is charged at 0% (e.g. exports of goods, most food) — it's a UK supply with a UK rate of 0%. Reverse-charge means the supply is outside the scope of UK VAT, but the customer accounts for VAT under their own country's rules (or, in the construction case, under UK rules but as the buyer not the supplier). Different mechanism, different paper trail.
For B2B services under the "general rule", yes — the place of supply is the customer's member state and they self-account under Article 196 of the EU VAT Directive. There are exceptions for specific service types (land-related, events, restaurant services), where the place of supply is where the service is physically performed. For these, normal VAT rules apply.
Not strictly — the rule is that you must make clear that the reverse charge applies and the customer is responsible. Citing Article 196 of Directive 2006/112/EC is the conventional clean wording for EU customers because their accountants recognise it instantly. For non-EU customers, a plain-English statement is fine.
If the supplier invoices from outside the UK (Microsoft Ireland, Google Ireland) and you've given them your UK VAT number, the invoice will arrive without VAT and reverse-charge applies. If you haven't given them your VAT number, they may charge you Irish VAT at 23% — which you can't reclaim and is wrong from your perspective. Provide your VAT number to all overseas business-software suppliers as a matter of routine.
No — there's no de minimis. A £30 Google Ads bill triggers reverse-charge accounting on the same basis as a £30,000 one. The net VAT effect is still zero, but the entries are required.
General guidance on UK VAT reverse-charge rules for freelancers. Not personal tax advice. For complex international structures (multi-jurisdiction supply chains, dropshipping, digital services to consumers) consult a VAT specialist.