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HMRC issues new VAT reverse charge guidance

HMRC has made new guidance available about the domestic reverse charge for building and construction services, which is set to take effect from 1 October 2019.

The reverse charge is a major change to the way VAT is collected in the industry, requiring the customer receiving the service to pay VAT to HMRC instead of to the supplier.

It will apply to individuals or businesses that are registered for VAT and supplying specified services that are reported under the construction industry scheme (CIS).

The updated guidance includes information on several areas of the scheme, including completing VAT returns, checking whether a customer is VAT and CIS-registered, and checking whether they are an end-user or an intermediary.

It also outlines transitional rules for contracts spanning 1 October, and how to change VAT treatment in the middle of a contract.

It advises those included to prepare for the reverse charge by:

  • checking whether it will affect sales, purchases or both
  • informing their regular clients or suppliers about the scheme
  • updating their accounting systems to deal with it
  • considering its impact on cashflow.

We can advise on the VAT reverse charge.