
Two bits of relevant and UpToDate information which you may wish to look at, the first relates to the arrangements to Pay Deferred Vat relating to the period 20 March to 30 June 2020 and the second exemptions relating to the Exemptions relating to the Domestic Reverse Charge (DRC) coming into effect from the 1st March 2021.
Deferred VAT payments (Period 20 March to 30 June 2020)
Arrangements to pay deferred VAT
Domestic Reverse Charge (DRC) —EXEMPTIONS
We outlined the domestic reverse charge (DRC) conditions in our previous emails, new conditions and exemptions have been clarified recently.
The 5% disregard rule applies where the invoice includes both work subject to the DRC and items which are not subject to the DRC. If the DRC work does not exceed 5% of the total invoice value the whole invoice can be treated as being outside of DRC and VAT at the relevant rates should be applied to the entire invoice.
Remember the DRC never applies to zero-rated work.
The 5% exemption could apply where a subcontractor is undertaking a range of tasks on new homes. The cost of labour will be zero-rated (not within DRC) as it is a supply of building work on new homes, but the supply of materials such as carpets, will be standard rated (within DRC).
If the labour is more than 5% of the total invoice value the whole invoice is outside of DRC. This applies even if the labour and materials are charged as one item as “supply and fit”, see section 16 of the DRC technical guidance.
The following construction related services which are always excluded from DRC:
- goods supplied on hire without labour
- professional fees such as from surveyors and architects
- employment businesses supplying staff
The last point is one to watch out for, as employment agencies should apply VAT to their invoices of labour to building firms.
We are happy to help you sort the DRC from the non-DRC supplies, and answer any other VAT questions you have.
Disclaimer Notice
The information contained in this article is for general information purposes only and does not constitute advice, Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose. We recommend that professional advise should be taken from a suitably qualified expert before undertaking any action.