From 1 March 2021 the domestic VAT reverse charge must be used for most supplies of building and construction services.

The charge applies to standard and reduced-rate VAT services:

  • for individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

A few areas to consider are:

  1. If you are a VAT registered construction or building services company registered with the Construction Industry Scheme (CIS), then this applies to you. If you receive an invoice with the reverse charge applied then you need to account for the VAT amount as part of your overall input tax, as if you have charged it to yourself.
  1. The VAT reverse charge for construction services applies to both standard and reduced-rate VAT supplies. However, it does not apply to zero-rated supplies.
  1. VAT reverse charge does not apply for home and domestic users. If the services are provided for non-VAT-registered individuals or other kinds of ordinary non-business individuals, then standard VAT rules apply.
  1. VAT reverse charge only applies to UK companies providing construction services in the UK to VAT-registered customers. So, if you undertake work overseas, you continue to operate in the usual way.
  1. You need to amend your invoices, making sure that you indicate the reverse charge that is applied. The HMRC is issuing some terminology that it expects businesses to use on invoices.

If you are a construction or building services company and you would like some more information or advice on getting ready for this change. Please do get in touch by calling 07825 571471 or sarah.tb@staccounting.co.uk