Taylorcocks has reported that the Domestic Reverse Charge due to be introduced in October 2019 but was twice delayed due to Brexit and Coronavirus, but will now come in from 1st March.
The charge will apply to all VAT registered construction businesses in the UK and effectively moves the VAT liability from the supplier to the customer. It does not apply on supplies made to non-VAT registered customers or the end-user of the property, such as a business who uses the property in their business. It also does not apply to zero-rated supplies, activities not covered by CIS or supplies of staff or workers.
All VAT-registered subcontractors who are supplying building and construction services to a VAT registered contractor, who is CIS registered, will need to inform the contractor on their invoices that Reverse Charge applies and the need to account for the VAT under the reverse charge rules.
The subcontractor will not charge VAT on their invoice and therefore will only include the amount charged for their service in box 6 of their VAT return. This differs from the current position where the sub-contractor has to include the VAT on their invoice and account for this to HMRC in their VAT return.
The contractor receiving the construction service will have to account for VAT by including it in both box 1 & 4 of their VAT return, rather than simply processing the sub-contractors VAT invoice.
If you require any assistance with this, please contact your local partner at Taylorcocks or on 0330 088 7111.