Who is affected?

Individuals and companies providing supplies of building and construction services that are both liable to standard or reduced rate VAT and reported within the Construction Industry Scheme (CIS).

What do I have to do differently now?

The change in legislation now means that only the company providing services to the end user (customer) will have to account for any VAT using the standard VAT treatment. When providing sub-contractor services to another VAT and CIS registered business you will now need to receive confirmation of whether they are the end user. If you do not receive any confirmation, or the contractor confirms that they are not the end user, you will not have to charge VAT on any services that have a labour element and instead note on your sales invoice that the reverse charge has been applied.

Who is the ‘end user’?

The end user is the business that does not make onward supplies of the services provided to them. A few examples of end users would be property developers and local authorities.

What about sales that involve only materials?

The VAT reverse charge for building and construction services only applies for sales that are reported within the Construction Industry Scheme and so must contain an element of labour costs. For invoices that are purely for the sale of materials, standard VAT rules apply.

Is there an easier way of determining whether the reverse charge rules apply?

Due to the complexity of the new scheme, HMRC have provided a flowchart to help visualise the chain of supply.

HMRC flowchart for the supply of services can be found here.

HMRC flowchart for the purchase of services can be found here.

Author: Sam Baldwin, Business Services Assistant Manager, Plus Accounting

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Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site

Date published: 04 March 2021