VAT reverse charge construction industry
06/11/2018

A change to the VAT rules first announced at Budget 2018 will come into effect from 1 October 2019. This change will make the supply of construction services between construction or building businesses subject to the domestic reverse charge. The reverse charge will only apply to supplies of specified construction services to other businesses in the construction sector.

This move is part of the government’s measures to combat what is known as missing trader fraud in the construction sector, where VAT due to HMRC is never paid by the subcontractor. This type of fraud has been common in other business sectors such as cross-border trading in mobile telephones, computer chips and emissions allowances.

Using the reverse charge procedure changes the usual VAT treatment so that the customer is liable to account for the VAT due rather than the supplier. This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.

The new reverse charge will be most relevant to sub-contractors and contractors carrying out supplies reported through the Construction Industry Scheme. These changes will lead to administrative changes for some 100,000 to 150,000 businesses in this sector, including many small businesses.

Adopting accounting systems to cope with this change will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to reflect the subcontractors' VAT, but then deduct the equivalent amount as input VAT on the same return.

There are less than 12 months until the new rules come into effect and businesses that will be impacted, need to begin making any necessary preparations.


About Us

Established in 1991 based in Epsom Surrey, CWM use technology to its fullest extent enabling us to work with clients based anywhere, with maximum efficiency resulting in lower costs.

Accreditation

 icaew logo 

   

    

sage1   xero transparent

Contact Us

1a High Street
Epsom
Surrey
KT19 8DA
Phone: 01372 727333
Email: info@cwmaccountants.com

Newsletter Sign Up

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login