Construction Industry Reverse VAT charges


UPDATE

As of 6th September 2019, the introduction of this tax has been delayed by HMRC to 1st October 2020. The reason for the delay is that industry is not yet ready to implement the changes and the 12 months delay will avoid coinciding with Brexit.

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Are you aware of the changes in VAT rules if you are involved in Construction?
Construction Industry Reverse VAT charges

If you are involved in the construction industry it is important that you are aware of the VAT changes that come into effect 1st October 2019.
This is a significant change to the way you account for Output VAT on contract work.

It applies in the following circumstances:
• The supply consists of Construction services and materials
• It is standard or reduce rate VAT
• It is between a UK VAT registered supplier and UK VAT registered customer
• Both parties are registered for CIS
• The customer intends to make an ongoing supply of construction services
• The supplier and customer are not connected.

What do you Need to Do?
With contracts starting 1st October 2019 you will need to check whether they fall within the reverse charge rules and when you will receive payment.
If payment is received before the 31st December 2019 then you account for VAT as normal for receipts after this date reverse charge rules will apply.

What does this mean in practice?
Where the rules are met instead of charging output VAT your invoice will say
‘Reverse charge applies at the VAT rate of either 20% or 5% if reduced rate’

Does this affect my VAT scheme?
Yes, it may do contact us for further advice.

Who pays the VAT?
Where you and the contractor are VAT registered then the contractor pays the VAT on your behalf. Please bear in mind that this may influence your cashflow as you will no longer be receiving the gross invoice only the net amount. You may wish to consider switching to monthly VAT returns. Please ask us for advice.

There are detailed rules on what type of work applies and circumstances of continuous supply so if you require any assistance on this please do not hesitate to contact us.

Karen Richardson