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VAT Reverse Charging – What you need to know

In addition to the following information, please see a list of resources below providing further information on VAT Reverse Charging.


From the 1st March 2021 certain sales invoices will be subject to new VAT provisions. VAT Reverse Charging will apply to the following contracts.

• Those where the participants are subject to CIS.

• Those where the end-user (Employer) is retaining the built asset for their own use.

• Those where ‘sales’ comprise labour, material and/or plant.

• Those that may include an element of excluded sales but where those excluded items form part of the whole.

VAT Reverse Charging will NOT apply to the following sales / contracts:

• Sales entirely consistent of supply-only assets.

• Sales entirely comprising of the installation of security systems (burglar alarm) closed circuit television and public address systems.

HMRC's approach to mixed supplies: 

The legislation is designed so if there is a reverse charging ‘element’, in a supply, then the whole supply will be subject to Reverse Charging. A significant amount of communication will be required.

If in doubt, provided the recipient is VAT registered, and the payments are subject to CIS, it is recommended that the reverse charge should apply.

View our VAT Reverse Charging For Building Construction Services diagram here

Members are advised to download our letter template to distribute it to their supply chain partners.

 

Additional Resources

   
01 HMRC Definitions 29 July 2019
02 JTC - Reverse Charge VAT 06 November 2019
03 Reverse Charge VAT - Cash Flow Model 01 October 2020
04 Reverse Charge VAT - Cash Flow Calculator 01 October 2020
05 VAT Reverse Charge Letter Template - Supply Chain Partners 01 October 2020
06 VAT Reverse Charge Letter Template - Subcontractor 10 June 2019
07 Training & Guidance on Reverse Charge VAT  10 June 2019
08 HMRC Technical Guidance Document - Reverse Charging 20 Oct 2020
09 Letter to Rt Hon Rishi Sunak MP 06 November 2019
10 Thinking of sending in monthly VAT returns to enable faster repayments? 06 November 2019

 

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