01296 738 668

VAT Reverse Charge on Construction Services

If your business operates CIS as a contractor or sub-contractor then you need to know about the VAT reverse charge that will come into force 1st October 2019.

The key aspects of the reverse charge are:

  • It will apply to standard and reduced-rated supplies of specified building and construction services made to VAT registered businesses, which in turn also make onward supplies of those building and construction services
  • The scope of supplies affected is closely aligned to the supplies required to be reported under the CIS scheme but does not include supplies of staff/workers.
  • If the customer is not VAT Registered or subject to CIS, this will not affect any sales.
  • This change means that it is the contractor who is receiving the specified construction services who must account for the VAT due rather than the sub-contractor. Then in turn the contractor deducts the VAT due on the supply as an input (subject to normal rules). This means that in most cases no net tax is payable to HMRC.
  • Businesses that make supplies directly to their end customer for example landlords, property developers or private individuals are excluded from the scope of this reverse charge.

Speak to AJR & Co Ltd for further advice on this subject or read more at HMRC