The Government is introducing a VAT reverse charge on certain building and construction services. The legislation will come into effect on 1 October 2019. This is a very significant development which will present major challenges for many building contractors bringing a  change to the rules for invoicing in the construction sector, it will be therefore of paramount importance for businesses involved in buying and selling construction services to understand the new rules.

The measure will, for certain supplies of construction services (‘specified services’), mean that the customer will be liable to account to HMRC for the VAT in respect of those purchases rather than the supplier (the ‘reverse charge’).

The reverse charge will apply through the supply chain where payments are required to be reported through the Construction Industry Scheme (CIS) up to the point where the customer receiving the supply is no longer a business that makes supplies of specified services these businesses are referred to as ‘end users’.

The reverse charge will exclude businesses that supply specified services to connected parties within a corporate group structure or with a common interest in land. In these circumstances, the supplies in question will then revert to normal VAT accounting rules.

The new charge does not apply to zero-rated supplies of construction services.

Shaikh & Co with office covering Tunbridge Wells, Tonbridge, Sevenoaks and surrounding area in Kent, can assist with numerous queries that will arise once the system kicks in and particularly the main procedures, processes and problems that the reverse charge will entail, such as

  • When the reverse charge applies
  • When it does not apply
  • How it works
  • How to invoice
  • The implications for subcontractors
  • The implications for main contractors
  • The implications for “end users”
  • The effect on Flat Rate Scheme businesses
  • Other ramifications of the change

if any help is required please contact us

CategoryTax Advice

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