Reading through the updated guidance for CIS NEW VAT Reverse Charge Rule for the Construction Industry might leave you confused. Here we have outlined what you need to consider:
If you supply constructions services, the reverse charge will only apply if you answer “Yes” to ALL of the following questions:
Is the work in question subject to either 5% or 20% VAT – ie is NOT zero rated?
Is your builder customer registered for both VAT and the CIS (Construction Industry Scheme)?
Does the work fall within the scope of the CIS, for example, plumbing, bricklaying, electrical work carried out on a building etc?
The Reverse charge will also apply to materials supplied by builders as part of their work, irrespective of whether they raise separate sales invoices for labour and goods.
CIS Reverse Charge: What do you need to do next?
- Download and read through the guidance below – we have included a link to Accounting Web Intuit Quickbooks’ Guide for Builders and Advisers
- Check your accounting/bookeeping systems to ensure they are ready to cope with these changes
- Check your invoice templates to make sure they include the correct terminology required on invoices as suggested by HMRC
- Update your Contracts to include HMRC’s suggested wording
- Consider the cash flow implications this could have on your businesses – you may want to consider changing to completing monthly VAT returns and or you may need to consider additional overdraft facilities
- Speak with your accountant who should be able to help you with this
Should I apply normal VAT Rules or apply the Domestic Reverse Charge?
If you are a business receiving building and construction services the flowchart below will help you
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The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above