Following on from the introduction of the domestic reverse charge scheme on 1 March 2021, please see below a summary and some frequently asked questions.
A summary of the conditions
- The scheme was deferred from October 2019 to October 2020 after industry concerns businesses had not been given suitable time to make the required changes.
- Once again the scheme was delayed until 1 March 2021 to help construction businesses overcome the effects that the coronavirus pandemic has had on them and give them more time to prepare.
- Is only applicable to UK VAT registered businesses supplying UK VAT registered customers.
- Includes supplies of building and construction services and goods where VAT can be charged.
- The supplier does not charge VAT on invoices.
- The customer pays the VAT due to HMRC rather than to the supplier.
Frequently asked questions
Q. Is Domestic Reverse Charge VAT on the whole invoice including materials?
A. Unlike the usual CIS rules, the answer is yes in most cases however there are some limited exceptions.
Q. What happens if a supplier has sent an invoice that should be domestic reverse charge VAT but isn't?
A. You need to contact your supplier and agree a method, you are unable to have the supplier, for example, applying domestic reverse VAT charge and the customer not doing so.
Q. If I am only supplying the machinery does the reverse VAT charge still apply?
A. No
Q. Do I require proof that my customer is the end user?
A. Yes, in writing or by email and please retain the proof. Remember, a property developer is an end user.
Q. Does my customer need to be VAT registered and CIS registered before I can use my reverse charge VAT?
A. Yes, you should also verify the VAT registration number.
Q. What happens if I am on the cash accounting VAT scheme?
A. The Domestic Reverse Charge is accounted for on the accrual basis even if you use the cash accounting VAT scheme.
Businesses providing Construction Services may need to adapt their accounting systems for dealing with VAT and there will be a negative impact on the cash-flows for many affected businesses, as they will no longer receive VAT payments from customers for services where the reverse charge applies.
If you have any further questions or concerns that are not covered above please email onlineservices@pierce.co.uk
Construction Connections LIVE Event
Focusing solely on the needs of Property and Construction businesses, the East Lancs Chamber of Commerce are inviting you to join them at the next event taking place at Accrington and Rossendale college on Wednesday 25 August.
Guest speakers include Andrew White, Head of Procurement at Onward Homes and Ian Hulse, Commercial Manager at Building for Humanity.
The event will run from 07.30 - 09.30 and a light breakfast and refreshments will be provided. Please register your place using the following link https://www.chamberelancs.co.uk/events/construction-connections-08-2021/. Non-members from within the sector are welcome to attend. Need assistance? Email any questions to membership@chamberelancs.co.uk