Date posted: 11th Jan 2021
We have recently recorded a webinar with Hilary Bevan from Bevan VAT where we discuss the new rules. Please see below:
New VAT rules are finally due to come into effect this March which will impact on accounting for VAT for transactions in the construction sector. These new rules, which were originally scheduled to start back in October 2019, have already been delayed twice as there was a lack of awareness of the changes in the industry.
The new “reverse charge” system of VAT accounting will affect sub- contractors supplying their services to main contractors in the construction sector.
Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the new reverse charge system, the sub-contractor will not show VAT on their invoice to the main contractor and will not account for output VAT.
This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors, some of whom were allegedly not paying over the VAT charged to HMRC.
The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules. Note that normal VAT invoices will continue to be issued to domestic customers.
Please contact us if you are likely to be affected by these changes and we can work with you to ensure you are ready for the new system when it starts. If you are a sub-contractor using the VAT flat rate scheme, it may be beneficial to leave that scheme as you may be entitled to a VAT refund on your expenses from 1 March 2021.
Read more articles from our January 2021 tax news below:
- Top Tax Tips for 2021
- Proposed changes to capital gains tax rules
- Employees reminded not to forget working from home and other tax relief
- New year resolutions to save tax
- New VAT rules for construction sector start on 1 March 2021
- £1 million Annual Investment Allowances extended
- Time to review your will?
- Catching up on deferred VAT payments
- SME R&D credit for surrendering losses – the rules are changing!
- Representative occupiers – what next?
Read more below: