{"id":19537,"date":"2019-07-11T14:29:49","date_gmt":"2019-07-11T14:29:49","guid":{"rendered":"https:\/\/smh.group\/?p=19537"},"modified":"2023-02-15T13:52:07","modified_gmt":"2023-02-15T13:52:07","slug":"vat-reverse-charge-for-building-and-construction-from-october","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/vat-reverse-charge-for-building-and-construction-from-october\/","title":{"rendered":"VAT reverse charge for building and construction from October 2020"},"content":{"rendered":"\n<p>You may recall plans for the VAT reverse charge being postponed from October 2019 to October 2020. The now majority Conservative government is still keen to press ahead with these plans, so now in the run up to the end of the current tax year it is as good time as any to start planning for how this may affect you.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">To recap&#8230;<\/h3>\n\n\n\n<p>New rules come into force in October 2020 for VAT-registered firms reporting under the Construction Industry Scheme (CIS) as part of HMRC\u2019s attempt to tackle fraud in the industry.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>What is the Domestic Reverse Charge?<\/strong><\/h4>\n\n\n\n<p>The domestic reverse charge (meaning UK-only) will be\nintroduced from 1 October and means that businesses receiving certain services\nwill have to pay VAT directly to HMRC instead of the supplier of those\nservices. This removes the flow of money from VAT between businesses, with the\nonus on the recipient of services to account for the VAT. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Who\nis affected?<\/strong><\/h4>\n\n\n\n<p>Those affected include sole traders and individuals\nworking as contractors, or sub-contractors to larger contractors, or through\nagencies. CIS registered companies and companies invoicing non-CIS registered\nclients will continue to charge VAT as usual.<\/p>\n\n\n\n<p>The charge applies only to supplies subject to standard\nor reduced rate VAT, not to zero-rated supplies or suppliers below the VAT\nthreshold. VAT accounted for under the charge will not count towards the VAT\nregistration limit for the recipient. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>The\nspecific services targeted include:<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>installations\nof systems such as heating, air-conditioning, power, drainage, sanitation etc.<\/li><li>internal or\nexternal painting and decorating<\/li><li>construction,\ndemolition, repair or alteration of any structures.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Exclusions <\/strong><\/h4>\n\n\n\n<p>Excluded from the reverse charge are professional work\nfrom surveyors and architects, machinery delivery or installation of security\nsystems.<\/p>\n\n\n\n<p>Any contracts that are only partially completed by the\nOctober start date will have to be reviewed to assess whether the new charge\nneeds to be applied to unfinished elements of a project. <\/p>\n\n\n\n<p>Subcontractors will need to plan for cashflow\nimplications as previous, perfectly legitimate, uses of VAT around cashflow\nwill disappear.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Penalties\nfor non-compliance<\/strong><\/h4>\n\n\n\n<p>HMRC has said that it will apply a \u2018light touch\u2019 on any\npenalties for the first six months to allow firms to transition to the new\nregulations. If businesses are seen to be trying to comply with the new rules,\nand correct any errors as soon as possible, they should avoid being penalised. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong><em>Example<\/em><\/strong><\/h4>\n\n\n\n<p><em>A VAT registered subcontractor, under the current rules, raises an\ninvoice of \u00a31,000 + VAT = \u00a31,200 gross to a main contractor.&nbsp; &nbsp;<\/em><\/p>\n\n\n\n<p><em>Under the rules from 1 October 2020:<\/em><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>The subcontractor will send\nan invoice for \u00a31,000 to the main contractor The invoice still needs to show the VAT that should be paid to HMRC even\nthough the subcontractor will not put on their own VAT return or pay it over to\nHMRC<\/em><\/li><li><em>The main contractor will\npay the subcontractor \u00a31,000 (rather than the \u00a31,200 under the current rules)<\/em><\/li><li><em>The main contractor will\nadd \u00a3200 VAT on the subcontractor\u2019s sale onto their own VAT return as sales\nVAT.<\/em><\/li><li><em>The main contractor can\nthen reclaim \u00a3200 of VAT on their VAT return as normal<\/em><\/li><\/ul>\n\n\n\n<p><em>The rules only apply to services that would normally be charged VAT.<\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>What do you need to do?<\/strong><strong><\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Review supplies made to and received from other VAT registered contractors to check if these will be subject to a reverse charge from October 2020<\/li><li>Ensure that your customers are an end user and obtain confirmation of their VAT registration and CIS status<\/li><li>Ensure your accounting systems are up to date a ready to deal with this change<\/li><li>Consider the impact on your cash flow from October 2020 and explore ways to mitigate this<\/li><\/ul>\n\n\n\n<p><strong>Plan\nahead \u2013 don\u2019t leave it too late!<\/strong><\/p>\n\n\n\n<p>There are several areas still to be clarified, but if you\nor your business may be affected from October then as ever it is always\nimportant to plan ahead and take action now.<\/p>\n\n\n\n<p>If you need any assistance with the transition please contact Jonathon Dickens, Partner at SMH Accounting &#038; Business Advisory on <strong>0114 266 4432<\/strong> or <a href=\"mailto:jdickens@smhca.co.uk\">jdickens@smhca.co.uk<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>New rules come into force in October for VAT-registered firms reporting under the Construction Industry Scheme (CIS) as part of HMRC\u2019s attempt to tackle fraud in the industry.<\/p>\n","protected":false},"author":4,"featured_media":19538,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[3],"tags":[319,318,11,19,76,320,316],"class_list":["post-19537","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smh-accounting-business-advisory","tag-construction","tag-construction-industry-scheme","tag-hmrc","tag-tax","tag-vat","tag-vat-registration","tag-vat-reverse-charge"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>VAT reverse charge for building and construction from October 2020 - SMH Group<\/title>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"VAT reverse charge for building and construction from October 2020 - SMH Group\" \/>\n<meta property=\"og:description\" content=\"New rules come into force in October for VAT-registered firms reporting under the Construction Industry Scheme (CIS) as part of HMRC\u2019s attempt to tackle fraud in the industry.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/devstagesite.co.uk\/smhgroup\/vat-reverse-charge-for-building-and-construction-from-october\/\" \/>\n<meta property=\"og:site_name\" content=\"SMH Group\" \/>\n<meta property=\"article:published_time\" content=\"2019-07-11T14:29:49+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-02-15T13:52:07+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/devstagesite.co.uk\/smhgroup\/wp-content\/uploads\/2019\/07\/Construction.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1980\" \/>\n\t<meta property=\"og:image:height\" content=\"1320\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Brendan Hall\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Brendan Hall\" \/>\n\t<meta name=\"twitter:label2\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/devstagesite.co.uk\/smhgroup\/vat-reverse-charge-for-building-and-construction-from-october\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/devstagesite.co.uk\/smhgroup\/vat-reverse-charge-for-building-and-construction-from-october\/\"},\"author\":{\"name\":\"Brendan Hall\",\"@id\":\"https:\/\/devstagesite.co.uk\/smhgroup\/#\/schema\/person\/637129b7464f960037f1b676f625570e\"},\"headline\":\"VAT reverse charge for building and construction from October 2020\",\"datePublished\":\"2019-07-11T14:29:49+00:00\",\"dateModified\":\"2023-02-15T13:52:07+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/devstagesite.co.uk\/smhgroup\/vat-reverse-charge-for-building-and-construction-from-october\/\"},\"wordCount\":667,\"image\":{\"@id\":\"https:\/\/devstagesite.co.uk\/smhgroup\/vat-reverse-charge-for-building-and-construction-from-october\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/devstagesite.co.uk\/smhgroup\/wp-content\/uploads\/2019\/07\/Construction.jpg\",\"keywords\":[\"Construction\",\"Construction Industry Scheme\",\"HMRC\",\"tax\",\"VAT\",\"VAT registration\",\"VAT reverse charge\"],\"articleSection\":[\"SMH Accounting &amp; 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