VAT Reverse Charge and The Construction Industry

From 1 October 2020 VAT registered contractors will have to account for VAT on services under the new VAT Domestic Reverse Charge rules.

If you are a VAT register business who supplies construction services to another VAT registered business for onward sale you will be required to issue a VAT invoice stating that the service is subject to the reverse charge.  The recipient must then account for the VAT due through its VAT return instead of paying the VAT to the supplier.  In effect the recipient pays the output VAT and reclaims the input VAT on its VAT return. 

Main contractors will also have to withhold VAT from VAT registered subcontractors and pay it to HMRC on their behalf through the Construction Industry Scheme (CIS) returns.

The reverse charge applies to services which fall within the Construction Industry Scheme, including construction and alterations to buildings or structures.

The reverse charge rules will not apply where the customer is the end user or a domestic customer or where the supplies are exempt or zero rated.

HMRC believe that the new rules will help reduce fraud and improve recoverability of VAT but have acknowledged that will initially cause some difficulties in practice.

Contact Patton Rainey and Associates if you need any further clarification or assistance in meeting the new accounting and reporting requirements.

Related Articles


From 1 October 2020 VAT registered contractors will have to ...

MAKING TAX DIGITAL

Making tax digital (MTD) is the latest initiative from HMRC ...
HMRC have recently issued new guidance regarding EU VAT refund ...
The 2018 Autumn Budget brought good news for businesses with ...

Patton Rainey & Associates

6 East Bridge Street, Enniskillen, Fermanagh, Northern Ireland, BT74 7BT

+44 (0)28 6632 3807
info@pattonrainey.co.uk

Accounting Services


  • Accounts preparation
  • Auditing services
  • Limited company accounts
  • Management accounts
  • Charity accounts
  • Payroll bureau services

Taxation Services


  • Income tax
  • Corporation tax
  • Capital gains tax
  • Inheritance tax
  • Value added tax
  • Tax planning

Advisory Services


  • Business consultation
  • Business plans
  • H M Revenue and Customs investigations

Social Media