The domestic reverse charge (referred to as the reverse charge) is a major change to the way VAT is collected in the building and construction industry.
It comes into effect on 1 October 2019 and means the customer receiving the service will have to pay the VAT due to HMRC instead of paying the supplier.
It will only apply to individuals or businesses registered for VAT in the UK (although it will not apply to consumers). This will affect you if you supply or receive specified services that are reported under the Construction Industry Scheme (CIS).
What you need to do to be ready for the start of the domestic reverse charge
You need to prepare for the 1 October 2019 introduction date by:
a) checking whether the reverse charge affects either your sales, purchases or both
b) making sure your accounting systems and software are updated to deal with the reverse charge
c) considering whether the change will have an impact on your cashflow
d) making sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will operate
What contractors need to do
If you’re a contractor you’ll also need to review all your contracts with sub-contractors, to decide if the reverse charge will apply to the services you receive under your contracts. You’ll need to notify your suppliers if it will.
What sub-contractors need to do
If you’re a sub-contractor you’ll also need to contact your customers to get confirmation from them if the reverse charge will apply, including confirming if the customer is an end user or intermediary supplier.
If you have any question in relation to the new reverse charge please contact Fisher & Co. Accountants on Wigan – 01942 513729