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Implementing Reverse Charge VAT

Implementing Reverse Charge VAT

Download the webinar slides – Reverse VAT webinar slides

The recording of the Webinar is available to FIS members. Click here to access the recording

What is Reverse Charge VAT

Members need to prepare themselves for the upcoming reverse charge VAT – this is perhaps the biggest change to construction taxation since the launch of the CIS Scheme. The change will see VAT being paid between construction firms ‘reversed charged’ which will have consequences for your cashflow and accounting systems.

Public guidance has now been released and is available here.  We urge all members to download a copy and take the time to read it. Companies must not start reverse charging before the start date.

Reverse charge VAT will involve some decision making before an invoice is sent to a customer based on the nature of the work done and accounts departments will need to know whether the customer is VAT registered and whether the customer is CIS registered.

JTC has created a flow chart, which is similar to what members will use daily after October 2019.

Think about collecting your customers VAT registration numbers and CIS UTR now for projects that will run over into autumn 2019. There will be far more guidance and help as we get closer to the start – just think and be aware that change is happening.

Advising your supply chain

It is suggested a letter or email is sent to your VAT registered subcontractors to draw their attention to the coming changes and start them thinking and planning. The more firms that know and understand that there are changes ahead the better. This letter is not just for your subcontractors. Imagine your contractors sending it to you, many contractors will use it or their own form of words. Make sure to test your own cash flow, and consider whether you ought to ask to become a monthly repayment trader.

An example letter is available here. This letter should go to all VAT registered subcontractors who you pay for construction operations, whether paid gross or net being subcontractors whose Unique Tax Reference Number (UTR) you have verified.

Advice from the Joint Taxation Council (available to FIS Members only)

In this month’s issue, the JTC provides guidance on Reverse Charge VAT and has produced an example flowchart to help businesses supplying building and construction services decide whether to apply normal VAT rules or apply the domestic reverse charge.

The Chancellor has reaffirmed the Government’s commitment to Making Tax Digital and advised there would be a light touch approach to penalties in the first year, where business are doing their best to comply, but there will be no light touch for failure to pay.

Download the latest issue here – JTC newsline April 2019

Reverse Charge VAT Workshops

Useful Links

A simplified introduction to Reverse Charge VAT and how it relates to the interiors sector was prepared by Haslers for the FIS in the May edition of the SpecFinish magazine (see Page 14-15)

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