We wanted to keep you informed of changes to HMRC legislation around reverse charge VAT for the Construction Industry Scheme.

New changes are coming into force in a few months time that may affect you and your business. We have put together an initial guide here and we will be in touch with you nearer to the time to assist you with your individual requirements surrounding the change.

A quick guide to the Construction Industry reverse charge VAT

From the 1st October, 2019 HMRC have introduced a domestic reverse charge VAT on supplies and services within the scope of the Construction Industry Scheme.

  1. This will only apply where your customer and your business are registered for BOTH CIS and VAT
  2. Sub-contractors (you) will NOT charge VAT on their invoices (for services or materials) to another sub-contractor/main contractor. The ‘customer’ will account for this VAT on their return to HMRC and then be able to reclaim it in the usual way
  3. Any work subject to the reverse charge will need to state this on the invoice using the correct wording.
  4. For the main customer of the services, the reverse charge will not apply and will be charged in the normal way – they need to confirm this in writing to the subcontractors they engage.
  5. The reverse charge does not apply if the service is zero-rated or the customer is not VAT registered
  6. Not having to pay VAT over to HMRC on your sales may result in you becoming a ‘repayment trader’ and you may wish to submit monthly returns to speed up the repayments due from HMRC
  7. The cash accounting scheme & flat rate scheme cannot be used for the supply of services that are subject to the reverse charge

What you need to do (and we will help you with this):

  1.         Check whether this applies to you 
  2.         Make sure your accounting system is updated to deal with the reverse charge
  3.         Ensure all staff members who deal with VAT are familiar with the reverse charge and how it will operate
  4.         Be aware of the impact to your cashflow 
  5.         Write or speak to your customers to find out whether or not they are an end-user or intermediary supplier

As always if you have any questions please don’t hesitate to get in touch but we wanted to make you aware of the upcoming changes as you may start receiving information from the contractors or subcontractors you work for regarding the new legislation. 

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