BUSINESS ADVICE
KEIR THOMAS-BRYANT FROM SAGE GIVES THE LOW-DOWN ON THE NEW VAT DOMESTIC REVERSE CHARGE AND WHAT IT MEANS TO YOU…
F rom March 1, electrical contractors and subcontractors working in the UK’s construction industry might have to handle and pay VAT in a different way following the introduction of the new VAT reverse charge system. Here are the answers to some frequently asked questions. 1. What is the VAT domestic reverse charge for construction services? The VAT domestic reverse charge for building and construction services, to give it its full title, is a change in how VAT is handled for certain kinds of construction services in the UK, along with the building and construction materials used directly in those services. In simple terms, for services they provide affected by the reverse charge, sub-contractors will require the contractor employing them to handle and pay the VAT directly to HMRC.
VAT charge goes into reverse
2. What VAT rates does the VAT reverse charge for construction services apply to? It applies to both standard and reduced-rate VAT supplies. It doesn’t apply to zero-rated supplies. 3. Why is the VAT reverse charge for construction services being introduced? HMRC says it will combat fraud, whereby construction businesses charge VAT for the services they supply but then disappear without paying their VAT bill. 4. Who does the VAT reverse charge for construction services apply to? It applies only to VAT-registered businesses who are supplying/ receiving services that are reported under CIS. In other words, it applies to
16 | IRELAND’S ELECTRICAL MAGAZINE
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