Reverse Charge On Construction Services

REVERSE CHARGE ON CONSTRUCTION SERVICES

HMRC is introducing a VAT reverse charge on certain building and construction services, which will come into effect on 1 October 2019.

My understanding is if the supplies received by the Council are governed by CIS regulations, and liable to VAT at the standard rate, then it will be obliged to treat them under the terms of the new Statutory Instrument and will need to account for output tax in Box 1 of the VAT Return, recovering it in Box 4.

Does this apply to all CIS transactions, if not, what specific areas would impact on Local Authorities, and what are the circumstances when reverse charge on construction services would apply?
  • My understanding, based on the HMRC document and statutory instrument here: www.gov.uk/.../vat-reverse-charge-for-building-and-construction-services , is that the only organisations that will be required to account for VAT using the reverse charge are those in the middle of the supply chain - i.e. those that are both receiving the services of subcontractors and making onward supplies of construction services to their clients. Those that are just receiving construction services are regarded as "end users", and should be invoiced with VAT in the usual way. I would expect that (in the majority of cases) local authorities and other public bodies would be "end users" - although there may be some circumstances in which onward supplies of construction are made.

    The HMRC guidance does note that "end users" may need to notify their suppliers of their status. This is because where a construction firm is supplying services to the public, it will be obvious that they are "end users" - but where the client is a business/organisation, it could be less clear.

  • [url=https://www.gov.uk/government/publications/vat-reverse-charge-for-building-and-construction-services-guidance-note/guidance-note#annexe1]HMRC Guidance[/url]


    This may also be helpful (I hope the link works). HMRC provide a useful flow chart in Appendix 1.

    I understand that "notification" of end user status is done in an informal way i.e. there is not a specific certificate or notice to give to a contractor.