Are you Ready for 1 March 2021? The VAT Reverse Charge for Building and Construction Services is Starting

The new VAT rules are hitting the construction industry from 1 March 2021 and will have a large impact on many businesses.  If you are VAT registered and working in the construction industry you must consider the impact the new rules will have on your business.

It is a major change to the way VAT is collected in the construction industry. The reverse charge is likely to affect you if:

• you are registered for VAT and
• you supply or receive services under the Construction Industry Scheme (usually known as CIS)

The new rules only affect supplies at the standard or reduced rate of VAT where the supplies are within the scope of the Construction Industry Scheme.  The change does not apply to zero rated supplies.

The VAT treatment of supplies to the final customer does not change.  The new rules only apply to the supplies between VAT registered businesses in circumstances where the recipient makes an onward supply of construction services.

Where the reverse charge applies, the VAT registered customer pays the VAT due directly to HMRC instead of paying it to their supplier.

The following link gives more information on the changes:-

New VAT rules for the construction industry

This  flowchart will help you consider whether to apply normal VAT rules, or apply the domestic reverse charge. Do not use it for services supplied by employment businesses.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Brett Jordan on Unsplash