UPDATED - Under new rules have been postponed from the original date of 1 October 2019 and will now come into effect on 1 October 2020. The new rules will mean builders, sub- contractors and other trades associated with the construction industry will have start using a new method of accounting for VAT
Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the reverse charge, a main contractor would account for the VAT on the services of any sub-contractor and the supplier does not invoice for VAT. The customer (main contractor) would then account for VAT on the net value of the supplier’s invoice and at the same time deduct that VAT from the payment to the sub-contractor.
This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors.
The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules.
Note: normal VAT invoices will continue to be issued to domestic customers.
Please contact us if you are likely to be affected by these changes and we can work with you to ensure you are ready for the new system.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.