Despite pressure from construction trade bodies, as of 1 March 2021 a new VAT reverse charge policy must be used for many forms of building and construction works services supply. The changes apply to individuals or businesses who are VAT registered in the UK and who are registered for the Construction Industry Tax Scheme (CIS).
Broadly, where applicable then in the case of a wide range of construction works services customers receiving the supply of the services will have to pay the VAT due directly to the Revenue, rather than to the supplier. This will involve the supplier issuing a VAT invoice stating that the service is subject to the domestic reverse charge. The customer will then need to account for the VAT in its VAT return.
The range of businesses covered by the new rules include those involved in property development and even those who might not consider themselves to be construction businesses. Suppliers involved in building work, alterations, repairs, extensions, painting, demolition, civil engineering and the installation of heating, lighting and air conditioning will be affected.
Exclusions from the new rules include where the supply is limited to particular operations, including professional work by architects, surveyors, interior designers, work involved in the installation of security systems, or the manufacture of components for heating, lighting and air conditioning. Where though such operations are supplied along with related construction work then the rules need to be carefully checked to see if the exclusions will no longer apply.
The construction industry has concerns as to the impact these changes will have on business cash flow all coming at a time of broad economic uncertainty, and just how accounting systems will need to be updated. The Revenue though appears intent on pressing ahead so for those impacted, its time to get prepared.
For more information on any of the items raised in this article please contact Colin Jones on 01223 532731 or click here to email Colin.