As you may well have heard from October 2019, HMRC are changing the way VAT is paid on certain building and construction invoices to clamp down on perceived VAT evasion in the industry.
The Domestic Reverse Charge will affect the VAT treatment of supplies between sub-contractors and main contractors. The VAT system currently in place means the customer pays the VAT owed directly to the supplier. This will remain unchanged for invoices supplied to end users, but the new changes will mean that from October 2019, no VAT becomes payable or repayable on services in the supply chain. This will therefore impact on supplies from sub-contractors to main contractors.
The change applies to a number of building and construction services at either standard (20%) or reduced (5%) VAT rate, that also need to be reported under CIS. It is not only accounting systems that will need to reflect these changes but there are also likely to be cash flow implications.
At this stage we understand that despite representations from industry, HMRC do not have any plans to delay the implementation, so businesses will need to make sure they fully understand these changes.
Smith Cooper can provide you with the advice required on how to take this forward, so please do not hesitate to get in touch with our specialist VAT team today.