CONSTRUCTION
Construction industryVAT changes – introducing the domestic reverse charge
One of the biggest changes to ever affect the construction industry is now just around the corner. With a view to tackling fraud in construction industry supply chains, from October 1 2019 the government has announced a domestic reverse charge will be introduced to prevent VAT losses continuing to occur. So what does this mean? Historically, it has been the supplier that accounts for any VAT due on certain construction services, however, the new rules change this and could have a substantial impact on cash flow and administration. It will now be the customer, rather than the supplier, that will be required to account for any VAT due from October 1 2019. The impact on cash flow should not be underestimated and could be significant for traders working in the construction industry currently submitting VAT returns quarterly. Cash flow As a result of the reverse charge, some businesses may find that, as they will no longer be in receipt of the VAT payment, which may currently be used to temporarily improve cash flow, they will need
Administration requirements Businesses
which receive services from another contractor
Rob Case,Tax Partner at Randall & Payne
will need to confirm which VAT rate applies (zero per cent, five per cent or 20 per cent) and whether the services received will be subject to reverse charge. Businesses issuing invoices for services liable to the reverse charge will need to ensure that the invoice contains all of the relevant invoicing requirements, including a statement that the customer is required to
account for VAT under the reverse charge. So what does the domestic reverse charge cover?
The reverse charge will affect supplies of building and construction services supplied at the standard (20 per cent), or reduced rate (five per cent), that also need to be reported under the Construction Industry Scheme (CIS).
to find another way to inject cash into their business as a way to finance working capital.
104 | July 2019 | www. punchline-gloucester .com
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