The reverse charge, the rule that catches people out
When you subcontract work for a VAT-registered main contractor, your subcontractor invoices you excluding VAT and you are the one who declares the VAT. Their invoice must carry the statement “reverse charge”.
The classic mistake is paying VAT the subcontractor charged by error: it is then not deductible, and you lose it.
The applicable rates
Type of work
New build
- Rate
- 20%
- Condition
- None
Type of work
Renovation of a home more than 2 years old
- Rate
- 10%
- Condition
- Client statement on the quote or invoice
Type of work
Eligible energy-efficiency renovation
- Rate
- 5.5%
- Condition
- Client statement and eligible work
| Type of work | Rate | Condition |
|---|---|---|
| New build | 20% | None |
| Renovation of a home more than 2 years old | 10% | Client statement on the quote or invoice |
| Eligible energy-efficiency renovation | 5.5% | Client statement and eligible work |
Since 1 March 2025, the certificate has been replaced by a statement on the quote or invoice in which the client certifies that the work meets the conditions for the reduced rate. Only repair and maintenance work under €1,000 incl. VAT can do without it, as long as the quote or invoice carries the other mandatory details. It is the document that goes missing on the day of the tax audit: without it, the reduced rate is challenged, and you pay the difference.
Attach every document to its job
It is the only discipline that really counts. A materials purchase left unallocated makes the job margin wrong, and a wrong margin shows up at year-end, when it is too late to adjust a quote.
- Allocate when you place the order, not when the invoice arrives.
- Track labour hours per job, even roughly.
- Compare planned and actual margin at the end of every job.
Progress billing
On a long job, you invoice as the work progresses. In the accounts, revenue is recognised as you go, and work in progress appears on the balance sheet. A financial year can therefore show a profit without a single job being finished.
The retention
The 5% held back until snags are cleared remains a receivable. It is owed to you, it sits on the balance sheet, and it is lost if nobody claims it a year later.