VAT Domestic Reverse Charge Scheme


VAT Domestic Reverse Charge Scheme. HMRC have decided to reintroduce the new regulations on 1 March 2021. Previously the implementation due in October 2020, having been postponed due to “avoid the changes coinciding with Brexit” and “to help businesses and give them more time to prepare”. You can see the update here.

VAT Domestic Reverse Charge Scheme

This also applies to you if you’re a VAT-registered business. And if you make supplies or purchases of the specified goods or services ie:

  • Mobile Phones
  • Computer Chips
  • Wholesale Gas
  • Wholesale Electricity

Why has this charge for construction services been introduced?

Furthermore, these regulations are designed to prevent the loss to HMRC of substantial fraud cases within the Construction industry that cost the Government millions of pounds annually.

VAT Domestic Reverse Charge Scheme – Construction

They are also applicable to:

  • Sub-Contractors who are VAT registered and subject to CIS (Construction Industry Scheme).
  • In other words sub-contractors who supply standard or reduced VAT rate services.
  • Those whose payments are reported under CIS.
  • Also those who are not working for the end user (the final customer).

If these conditions are not applicable, the sub-contractor should invoice plus VAT in the normal way.

In other words it means that sub-contractors will no longer charge VAT to their contractor.

If you need advice please do feel free to contact us at abm accountant.

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