03 Jul Construction Sector (CIS) VAT changes from 1 October 2019
As of the 1st October 2019 the Government are introducing a reverse charge VAT scheme into the construction industry as an anti-fraud measure, intended to remove the opportunity for fraudsters to collect VAT from their customers then disappear before paying it to HMRC.
The Reverse Charge will apply to all CIS registered businesses buying and selling construction services that are subject to CIS reporting, apart from those that are zero rated, up to the point in the supply chain where the customer is the end-user. At this point the normal reporting and collection of VAT resumes.
Where the reverse charge applies, rather than the supplier charging and accounting for the VAT, the recipient will effectively charge the VAT to itself and recover it as input tax, under a process known as the VAT Domestic Reverse Charge. Non CIS services are not subject to the reverse charge, but mixed invoices (where both CIS and non-CIS supplies are invoiced) will be subject to the new rules.
The new arrangements will change how VAT is collected, and recorded on your VAT return. Sub-contractor invoices must continue to show all the information normally required to be shown on a VAT invoice, and in addition you should annotate the invoice to make clear that the domestic reverse charge applies and that the customer is required to account for the VAT.
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