In 2021 new rules come in for use of the domestic VAT reverse charge. From 1 March, it must be used for most supplies of building and construction services.

The charge applies to the following standard and reduced-rate VAT services:

  • individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

How to prepare

Here is what you need to do to prepare for the changes:

  • make sure your accounting systems and software can deal with the reverse charge
  • consider whether the change will impact your cash flow
  • make sure any staff responsible for VAT accounting at your business are familiar with the reverse charge and how it will work

The VAT reverse charge doesn’t apply to everyone. If it does not apply to your business than you must follow the normal VAT rules. There are flowcharts on the Government website that will help you work out if you need to use the reverse charge.

When must I use the VAT reverse charge?

You must use the reverse charge for the following services:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
  • constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
  • painting or decorating the inside or the external surfaces of any building or structure
  • services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

When must I not use the reverse charge?

Do not use the charge for the following services, when supplied on their own:

  • drilling for, or extracting, oil or natural gas
  • extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose
  • manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
  • manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site
  • the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
  • making, installing and repairing art works such as sculptures, murals and other items that are purely artistic signwriting and erecting, installing and repairing signboards and advertisements
  • installing seating, blinds and shutters
  • installing security systems, including burglar alarms, closed-circuit television and public address systems

Getting more information

If you need further information on VAT reverse charge for building and construction services in 2021, get in touch! Our team are available Monday – Friday, 8:30am – 4:30pm and can help you with any questions you have. Just go to our contact page for all of our details.