VAT Changes Construction Industry Reverse charge – and QuickBooks accounting
A Major VAT Change comes into effect from 1st March 2021. If this affects you, we can assist you in explaining the new rules and how to deal with them through your QuickBooks program.
In essence, this will affect only VAT Registered construction businesses.
This will apply for Invoices issued from 1st March 2021
This applies to “Construction services and materials”
It is made at standard or reduced rate VAT.
The supplier and customer will both be registered for CIS
The customer intends to make an ongoing supply of construction services to an unconnected party.
The CIS reverse charge does not apply to taxable supplies made to the following customers:
A non-VAT registered customer.
'End Users' i.e. a VAT registered customer who is not intending to make further on-going supplies of construction.
'Intermediary suppliers' who are connected e.g. a landlord and his tenant or two companies in the same group.
Where the reverse rate applies, the supplier instead of invoicing for VAT in the normal way will “reverse charge” the vat to the customer. The supplier then accounts for the VAT as both an output and input vat, and thus no VAT is collected from the customer nor paid over to HMRC.
Where there is a reverse charge element in a supply then the whole supply will be subject to the domestic reverse, so hence where as CIS is only relevant to the labour part of an Invoice, Reverse charge VAT will be relevant to the total Invoice not just the labour element.
The details HMRC guidance is
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