Whether you are a self employed builder or operating a large construction business, the introduction of the VAT domestic reverse charge for building and construction services will effect you from 1 October 2020.
The domestic reverse charge will only affect supplies that are standard or reduced rated for VAT purposes and where payments are required to be reported through the Construction Industry Scheme (CIS).
This means supplies between sub-contractors and contractors, as defined by CIS, will be subject to the reverse charge unless they are supplied to a contractor who is the end user. In this context, the end user will usually be the recipients who use the building or construction services for themselves.
A domestic reverse charge means that the contractor receiving the supply of construction services must account for the VAT due rather than the sub-contractor. In turn, the contractor deducts the VAT due on the supply as Input VAT, meaning the net effect payable to HMRC is nil.
The Government have introduced this as they feel this method removes the scope to evade any VAT owing to HMRC.
The following flow charts will help you to initially identify which VAT rules you will need to follow:-
As you can see, the rules for the domestic reverse charge are complex and if you feel these will affect you and your business, please contact us for advice and guidance.