The long awaited and much delayed domestic reverse charge goes live from 1 March 2021 affecting the way business invoice and account for VAT for those working in the construction industry. Businesses will have to apply to the new regulations if the works performed and the nature of the supply fall within the scope of the legislation.

The following activities are affected:

• constructing, altering, repairing, extending, demolishing or dismantling buildings or structures;
• constructing, altering, repairing, extending, demolishing any works forming, or planned to form, part of the land;
• installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure;
• internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;
• painting or decorating the inside or the external surfaces of any building or structure;
• services which form an integral part of, or are part of the preparation or completion of the services described above

VAT registered businesses supplying services above must apply the new rules where:

• the customer is registered for VAT in the UK
• payment for the supply is reported within the Construction Industry Scheme
• the services supplied are standard or reduced rated
• it is not an employment business supplying staff or workers
• the customer has not given written confirmation that it is an end user or intermediary supplier

For VAT registered businesses buying services the new rules must apply where:

• payment for the supply is reported within the Construction Industry Scheme
• the supply is standard or reduced rated
• the supply does not involve the hiring of staff or workers
• the customer is not using end user or intermediary exclusions

Suppliers must make it clear on their invoices that the work falls within the scope of the domestic reverse charge legislation and that it is the customers responsibility to account for any VAT due on their supply.

As a result of the changes businesses making regular supplies of services may find that their Input VAT often exceed their Output VAT and that they have become repayment traders.  To improve their cashflow they may like to consider swapping to monthly VAT returns.

Give our friendly team at Buzz a call on 0117 370 6270 and we can give you some advice on what you might need, how to get started and save you some time!