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HMRC internal manual

VAT Fraud

HM Revenue & Customs
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Basic interventions: other interventions: reverse charge on specified goods and services



Under the reverse charge mechanism, it is the purchaser of the goods, rather than the seller, who is liable to account for the VAT on the supply. The supplier will not charge VAT, but will have to specify on his invoice that the reverse charge applies. The purchaser must account for VAT, but has the right to input tax recovery on the same VAT return, subject to the normal conditions.

A supplier who has made a reverse charge supply must undertake the following procedures. He must include the value of the supply in the total value of sales figure in box 6 of the VAT return, but there is no output tax to include in box 1, as that is the responsibility of the customer. He must notify HMRC when he first makes a reverse charges supply and he must complete a reverse charge sales list when he submits a VAT return. The list must give details of each customer to whom he has made reverse charge sales, including the VAT registration number and the net value of sales to that customer in each calendar month.

The reverse charge makes it impossible to commit VAT fraud through trading the kind of goods and services to which the measure applies, except by means of transactions in goods only (mobile phones and computer chips) that fall below the de minimis level of £5,000. Each participant in the transaction chain has to pay its supplier’s output tax. There is thus no opportunity:

  • for the missing trader to disappear with VAT paid to it by its supplier but owed to HMRC;
  • for taxable persons to divert VAT due to their suppliers to other parties through third-party payments (VATF62200); and
  • for a taxable person to claim a net VAT repayment from HMRC.

The specified goods

The reverse charge for specified goods applies to supplies of:

  • mobile phones and computer chips in excess of £5,000 which are made by one taxable person to another within the UK;
  • gas; and
  • electricity.

The specified services

The reverse charge for specified services applies to emission allowances. Unlike specified goods there is no de minimis limit, so the reverse charge applies to all supplies of specified services no matter the value.


Guidance on the application of the reverse charge for specified goods is also available in Notice 735 and the reverse charge for specified goods and services guidance manual (VATREVCHG).