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Construction Services Update...

Is your care provision currently using building construction services… or planning to do so?

The Construction Industry Scheme VAT domestic reverse charge measure will apply to supplies of construction work from 1 March 2021. The aim of the measure is to reduce VAT fraud in the construction sector.

If you receive construction services subject to the reverse charge from sub-contractors, you will not be charged VAT on these services after 28 February 2021. Instead, you’ll have to calculate and account for the VAT on your VAT Return and recover it simultaneously on the same VAT Return, subject to the normal rules on VAT input tax deduction and based on your partial exemption recovery rate if the services relate to your business as a whole.

The reverse charge will apply when all the following are met:

  • The supply consists of construction services and materials.
  • The supply is subject to VAT at the standard or reduced-rate.
  • A UK VAT registered supplier is making the supply to a UK VAT registered customer.
  • The supplier and the customer are registered for the Construction Industry Scheme (CIS)
  • The customer intends to make an ongoing supply of construction services to another party.
  • The supplier and customer are not connected.

The CIS reverse charge does not apply to any of the following supplies:

  • Supplies of VAT exempt building and construction services.
  • Supplies that are not covered by the CIS, unless linked to such a supply.
  • Supplies of staff or workers.

The CIS reverse charge does not apply to taxable supplies made to the following customers:

  • A non-VAT registered customer.
  • ‘End Users’ i.e. a VAT registered customer who is not intending to make further on-going supplies of construction.
  • ‘Intermediary suppliers’ who are connected e.g. a landlord and his tenant or two companies in the same group.

If you would like further details, or more explanation, please see

https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services

or contact us directly

Clare Newboult clare@vatsol.com

Tel: 0114 280 3630

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