March 2, 2020 | 2years | Doctor Spanners Toolbox

Although, as a Doctor I like to focus on the strategic healing of business, sometimes even I need to knuckle down and get to grips with the latest changes to VAT rules and their impact on the Construction Industry.

Back in 2019 HMRC announced plans to alter the way construction businesses potentially deal with VAT and the interaction between their customers and suppliers – what is known as VAT reverse charge. Initially it was due to be introduced from 1st October 2019, but as late as July 2019 a survey by the Federation of Master Builders indicated that over two-thirds of construction SMEs had not even heard of it.

Thankfully for all of us, HMRC has decided to delay the introduction by one year to 1st October 2020 – so heart attacks all round have been averted – or maybe just delayed if we don’t plan for it now.

In essence, what is it? Well, the VAT reverse charge is effectively an extension of the Construction Industry Scheme (CIS); HMRC says the VAT reverse charge doesn’t apply to sub-contractors unless they answer yes to the following:

• Are any of the supplies you are making within the scope of the CIS?
• Is the supply standard or reduced-rated?
• Is your customer VAT registered?
• Will your payment be reported under CIS?
• Are you sure the customer is not an end user?

Or to simplify it, for services they provide, sub-contractors will require the contractor employing them to handle and pay the VAT directly to HMRC.

As a contractor or sub-contractor if these scenarios are likely to apply to you after October, then prevention is always the best medicine; and preparation is always the best business strategy. HMRC have issued a number of guidance notes, and your accountant can also assist with any concerns.

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