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Self assessment payment Plans19-Feb-2021
Today HMRC has announced that Self Assessment customers will not b..
CIS Domestic VAT reverse Charge09-Feb-2021
Construction Industry Scheme (CIS) Domestic VAT Reverse Char..
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Advice Note Advisory Fuel Rates (AFRs) from 01 December ..
CIS Domestic VAT reverse Charge
16-Feb-2021Construction
Industry Scheme (CIS) Domestic VAT Reverse Charge
What
is the CIS Domestic Reverse VAT Charge?
The CIS Domestic Reverse VAT Charge
has been designed by HMRC to prevent fraud where some traders are receiving VAT
from their customer, but not reporting or paying it to HMRC. Where the reverse
charge applies, customers within the construction industry receiving the supply
of construction services must pay the VAT due on those services directly to
HMRC rather than to the supplier.
What
does the CIS Domestic Reverse VAT Charge apply to?
The CIS Domestic Reverse Charge
for VAT applies to any VAT on work which is subject to the Construction
Industry Scheme (CIS).
When
does the CIS Domestic Reverse VAT Charge come into force?
The CIS Domestic Reverse VAT
Charge measure was initially intended to come into force in October 2019. The
measure has been delayed twice due to Brexit and the coronavirus pandemic. The
charge is now intended to come into force on 01 March 2021.
When
is the CIS Domestic Reverse VAT Charge applied?
There
are certain conditions that must be met before the charge is applied:
1. Both the
Supplier and their Customer are registered under the Construction Industry
Scheme;
2. There is
no connection between the Supplier and Customer;
3. The
supply is made between a UK VAT registered supplier and a UK VAT registered
customer;
4. The VAT
supply is for construction services and materials;
5. The
customer intends to make an ongoing supply of construction services to a third
party;
6. VAT is
chargeable.
When
does the CIS Domestic Reverse VAT Charge not apply?
The
Reverse Charge does not apply to:
1. Supplies
of VAT exempt building and construction services;
2. Supplies
of staff or workers;
3. Supplies
not covered by the Construction Industry Scheme.
Who
does the CIS Domestic Reverse VAT Charge not apply to?
The
Reverse Charge does not apply to:
1. A
non-VAT registered customer;
2. A
customer who is not making on going supplies i.e. the end user;
3. Connected
parties.
How
do I account for the CIS Domestic Reverse VAT Charge?
If
the VAT reverse charge rules apply, you may no longer need to pay VAT to HMRC
each quarter.
Invoices
sent to your customer (or “self-billing” invoices if your customer prepares their
own) should state that a VAT Reverse Charge is due. The invoice should
continue to show the value of the VAT and the VAT rate applicable. No VAT is
actually charged on the invoice and your customer will not pay the VAT over to
you.
Your
customer will report and pay any VAT due to HMRC on their own VAT return.
How
do I report the CIS Domestic Reverse VAT Charge?
Under
the reverse charge rules, the responsibility to report and pay VAT to HMRC will
be with your customer. Previously, this responsibility has been with your
limited company.
What
affect will this have on my business?
The overall affect will be nil
with no affect on your business profit. However if you rely on receiving the
VAT for your company’s cash flow you may wish to retain additional money in
your business bank account to allow your company to pay for any ongoing
business expenses.
Will
the CIS Domestic Reverse VAT Charge apply if I am Gross Status for CIS?
Yes.
The VAT reverse charge rules still apply if you are subject to CIS but have
received permission from HMRC to use “Gross Status”.
If
you have any questions please do not hesitate to contact your Advisor on 01244
625 500 and we will be happy to explain further.
If you would like to discuss any of the issues noted above please
contact us on:
01244 625 500 or 01978 364 000
contactus@foremansllp.com
Whilst all due care and
attention has been taken in the preparation of these notes no liability can be
accepted for any omission or item contained therein.
Foremans LLP
January
2021
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