I originally wrote about the Domestic Reverse Charge For VAT back in 2019, but after it was delayed, and then delayed again, it's finally going to happen in March of this year ...
The 1st of March 2021 to be precise, and it is a significant modification to the way VAT is recorded, reported, and paid in the UK construction industry.
Whether you are or main contractor or a sub-contractor, you're going to be affected, however, there are some exceptions:
- Services supplied to non-VAT registered individuals, such as homeowners or domestic users - End users or connected intermediaries such as property landlords or owner/occupiers - Work done overseas - Any business using the Flat Rate Scheme - Temporary workers supplied by your business where you are responsible for paying them, rather than it being contracted out
Work should still be invoiced and accounted for at all time.
HMRC has published a list of services that are under the new reverse charge regime. Where there is a mixed supply, where some is covered by the reverse charge and other parts by the normal VAT element, you should apply the reverse charge to the whole supply.
The reverse charge for VAT will affect many parts of your business including contracting, invoicing and your overall accounting procedures, but do remember this differs depending on whether you are a main contractor, a sub-contractor ... or both.
Any work invoiced on or after the 1st of March 2021 will be affected by the reverse charge for VAT.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.