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VAT: domestic reverse charge

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VAT: domestic reverse charge for building and construction services

The domestic reverse charge (referred to as the reverse charge) is a major change to the way VAT is collected in the building and construction industry. It will be put into effect on 1 March, 2021.

This means that customers receiving the service will have to pay VAT due to HMRC instead of paying the supplier.

It will only apply to individuals or businesses registered for VAT in the UK (although it will not apply to consumers).

This will affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

What do contractors need to do?

If you’re a contractor, you’ll need to review all your contracts with sub-contractors to decide if the reverse charge will apply to the services you receive under your contracts. You’ll need to notify your suppliers too.

What do sub-contractors need to do?

If you’re a sub-contractor, you’ll need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end-user or intermediary supplier.

How does the domestic reverse charge affect you?

HMRC understands that implementing the reverse charge may cause some difficulties. For more details on this change and to learn how it may impact your business, please visit this HMRC page.

What does this mean?

This means that customers receiving the service will have to pay VAT due to HMRC instead of paying the supplier.

It will only apply to individuals or businesses registered for VAT in the UK (although it will not apply to consumers).

This will affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

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

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

Source

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