From 1 March 2021, the VAT domestic reverse charge for building and construction services is due to come into effect.
Rather than paying their supplier, a building contractor receiving a service from a supplier will have to charge itself (or “reverse charge”) the VAT on services received and pay HMRC directly.
Under the new rules, a VAT-registered business, which supplies certain construction services to another VAT registered business (that is not the end-user), will be required to issue a VAT invoice stating that the service is subject to the reverse charge, at the appropriate rate (5% or 20%).
The customer must then account for the VAT on that supply through its VAT return, instead of paying the VAT to the supplier. The customer may then recover the VAT amount as input tax, subject to the normal rules.
To find out more about how HMRC’s reverse charge works, whether you will be affected and what action you need to take please read our factsheet.
For any further help or advice, please get in touch.