Reverse Charge VAT Calculator 2026/27

B2B Reverse Charge VAT Calculator

✓ Verified for 2026/27

Transaction Details

£
Output VAT (Due)
£2,000
accounted in Box 1
Input VAT (Reclaimed)
£2,000
reclaimed in Box 4
Net Cash Effect
£0
zero cash flow impact
Total Purchase Value
£10,000
declared in Box 7

Reverse Charge Accounting Entry

Invoice Purchase Value £10,000
Output Tax (Box 1) +£2,000
Input Tax (Box 4) -£2,000
Net Cash Paid £0
Purchase 71%
Output VAT 14.5%
Input VAT 14.5%
ℹ️ Under the Reverse Charge, the UK buyer self-accounts for VAT on services or goods supplied by overseas businesses (or specific domestic trades, like construction under CIS). The buyer acts as both the supplier (Output VAT) and customer (Input VAT), resulting in a net-zero cash transaction.
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Verified for Accuracy (2026/27 Tax Year)
Fact-checked and audited by David Vance, CTA FCA, Chartered Tax Advisor & Accountant. Verified against official HMRC rules.

How We Calculated This

  1. Input variables: Enter the relevant amounts, rates, or percentages in the form.
  2. Real-time breakdown: The calculator applies HMRC rules and thresholds for the 2026/27 tax year to process the values.
  3. Display outputs: The visual graphs, donut charts, and tables are compiled dynamically to show your net take-home and deductions.

Real-World Examples

Standard Scenario

A basic calculation applying standard UK tax bands and allowances.

Calculation runs based on standard HMRC rules.
With Pension or Deductions

Factoring in a percentage of salary sacrifice or pension contributions.

Deductions are calculated and adjusted accordingly.

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Frequently Asked Questions & Detailed Tax Guide

What is the Domestic VAT Reverse Charge?

The Domestic VAT Reverse Charge is an anti-fraud measure introduced by HMRC to combat missing trader fraud (often called carousel fraud) in high-risk sectors. Under standard VAT rules, a supplier charges VAT to their customer, collects the tax, and pays it to HMRC. Under the reverse charge, the supplier does not charge VAT on their invoice. Instead, the customer (the buyer) must report both the output VAT (sale) and input VAT (purchase) on their own VAT return. This effectively renders the transaction cash-neutral for the buyer and prevents suppliers from pocketing the VAT and disappearing before paying HMRC.

Where does the Reverse Charge apply?

The reverse charge applies primarily to specific business-to-business (B2B) transactions in the UK:

  • Construction Industry Scheme (CIS): Applies to specified construction services between VAT-registered businesses where the buyer is not an “End User” (a developer or tenant who actually uses the finished building).
  • Mobile Phones and Computer Chips: Applies to wholesale purchases of these items exceeding £5,000 in value.
  • Renewable Energy Certificates: Wholesale trading of electricity and gas certificates.

Step-by-Step Mathematical Calculation: CIS Reverse Charge

Let’s look at a subcontracting scenario under the CIS VAT Reverse Charge:

  • 1. Subcontractor invoice amount (excluding VAT): £10,000.
  • 2. The subcontractor is registered for VAT, but because the buyer is a main contractor (not an End User), the reverse charge applies.
  • 3. Subcontractor prints invoice: **£10,000** with the note: “Reverse charge applies. Customer to account for VAT to HMRC at 20%.”
  • 4. Main Contractor receives invoice. They calculate the VAT due at 20%: £10,000 * 20% = £2,000.
  • 5. Main Contractor VAT Return entries:
    – Box 1 (Output VAT): **+£2,000**
    – Box 4 (Input VAT): **+£2,000** (This makes the transaction cash-neutral, assuming they have full recovery rights).
    – Box 7 (Total Purchases): **+£10,000**

Tax Expert Pro-Tips: Verifying End User Status

David Vance, CTA FCA, recommends: “Subcontractors must obtain written confirmation from their clients stating whether they are an ‘End User’ or ‘Intermediary Supplier’ before invoicing. If the client is an End User, the subcontractor must charge standard 20% VAT. If the client fails to respond or confirms they are not an End User, the reverse charge must be applied. Make sure your accounting software is configured to handle reverse charge tax codes correctly to avoid auditing errors.”

Legislative References

  • Value Added Tax Act 1994 – Section 55A (Customers to account for tax on certain supplies).
  • HMRC VAT Notice 735: Domestic reverse charge procedure.