VAT Reverse Charge – Accounts Navigator Associates

From 01 March 2021, most supplies of building and construction services will require the domestic VAT reverse charge to be used. This charge applies to standard and reduce-rate VAT services for individuals or businesses who are registered for VAT in the UK and for services reported within the Construction Industry Scheme.

But what does this mean for you and your business?

WHEN SHOULD YOU USE THE REVERSE CHARGE?

The reverse charge must be used for the following services:

· Constructing, altering, repairing, demolishing buildings/structures (permanent or not) — including offshore installation services

· Constructing, altering, repairing demolishing of works forming (or planning to form) part of the land including: walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence

· Installing heating, lighting, AC, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building/structure

· Internal cleaning of buildings and structures carried out so far during construction, alteration, repair, or restoration

· Painting/decorating the interior or exterior surfaces of any building or structure

· Services which form an integral part of (or are a part of the preparation or completion) of any services described above, including: site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

WHEN SHOULDN’T YOU USE THE REVERSE CHARGE?

· Drilling for/extracting oil or natural gas

· Extracting minerals (underground and surface working) and tunnelling, boring or construction of underground works for this purpose

· Manufacturing building/engineering equipment/components, materials, machinery/plant, or delivery of these to site

· Manufacturing components for heating, lighting, AC, ventilation, power supply, drainage, sanitation, water supply or fire protection systems or delivery of these to site

· Professional work of architects/surveyors or of building, engineering, interior/exterior decoration, and landscape consultants

· Making, installing, and repairing art works such as sculptures, murals and other items that are purely artistic; sign-writing and installing/repairing sign boards and advertisements

· Installing seating, blinds, and shutters

· Installing security systems, including burglar alarms, closed circuit TV and public address systems

IF YOU SUPPLY BUILDING/CONSTRUCTION SERVICES:

The reverse charge must be used from 01 March 2021 if you are VAT registered in the UK, supply building/construction services and:

· Your customer is registered for VAT in UK

· Payment for supply is reported within Construction Industry Scheme (CIS)

· Services supplied are standard or reduce rate

· You are not an employment business supplying staff, workers, or both

· Your customer has not given written confirmation that they are an end user (final customer) or intermediary supplier (linked to end user)

What you need to do:

· Check if your customer has a valid VAT number

· Check your customer’s CIS registration

· Review your customers to decide and inform if reverse charge will apply

· Confirm whether customer is end user or intermediary supplier

· Record reverse charge by making sure your invoices show the reverse charge applies so customers no longer pay any VAT

IF YOU BUY BUILDING/CONSTRUCTION SERVICES:

The reverse charge must be used from 01 March 2021 if you are VAT registered in the UK, buy building/construction services and:

· Payment for supply is reported within CIS

· The supply is standard or reduced rate

· Are not hiring staff, workers, or both

· You are not using end user or intermediary exclusions

What you need to do:

· Check if supplier has a valid VAT number

· Tell your supplier if you are an end user or intermediary supplier

· Account for the charge by making sure the invoice you receive is correct, check the list of services that must use reverse charge and record reverse charge on VAT return and reclaim it the usual way

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