Image result for reverse vat charge 1 october 2020

As originally announced at Budget 2017 there are important changes for the construction industry on the way VAT is handled.

Changes which apply from 1 October 2020 mean that main contractors will stop paying VAT to sub-contractors working on projects where the Construction Industry Scheme (CIS) applies. Instead the main contractor will pay the VAT directly to HMRC.

Who will it affect?

It will affect you if you work on any contract covered by the CIS and both you and your main contractor or sub-contractor are VAT registered businesses. If your sub-contractors are not registered for UK VAT, or your supplies are zero-rated, then the reverse charge will not apply.

What you need to do:

  • check whether the VAT reverse charge might affect you and where it does, and payments are under a contract that will continue after 1 October 2020, ask your sub-contractors and/or contractors about their CIS and VAT registration status if you do not already know them
  • decide how the change will affect your cash flow and if you need to make any changes to your business practises
  • talk to the people that help you invoice for work or manage your VAT about the changes so they can make arrangements to update your accounting systems and apply the correct treatment from 1 October 2020

Further Information

You can find helpful information online at GOV.UK, by searching for ‘reverse VAT charge for building and construction services’. This page includes information on the services affected by the change, how it works, how to submit a VAT return, along with extensive guidance notes.

You can also attend a live webinar where you can find out more and ask questions. To find out dates of the next webinar or watch an existing webinar go to GOV.UK and search for ‘help and support for the construction industry scheme’.

Your accountant, bookkeeper or the person who manages your VAT returns for you may also be able to advise you on how this might impact on your business.