The next step

HMRC guidance on the domestic reverse charge

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Countdown to new VAT rules

Delayed start. Following two false starts the so-called “VAT domestic reverse charge for construction services” begins on 1 March 2021. From that date where your business receives a supply of construction services it, rather than the supplier, must account for the VAT. HMRC’s latest guidance succinctly sets out the factors and steps that each party must consider if a supply involves building or construction work.

Guidance. HMRC’s latest guidance is in three parts, one for suppliers, one for the recipient of supplies and the last technical information for both parties (see The next step ). The scheme requires suppliers and their customers to co-operate in deciding if and to what extent the charge applies.

How to use the guidance. The first two parts are the starting point for the supplier and customer. If it’s clear from these to both parties that the reverse charge doesn’t apply, the normal VAT rules must be used. That is, the supplier works out the VAT and accounts for it on their VAT returns. If the parties can’t agree about the charge, the technical guidance can be consulted to resolve any differences. Each part contains links to other HMRC guidance you may need.

Work in progress. While the start date for the reverse charge is 1 March 2021, construction services won’t neatly begin and end on that date; they might already be in progress at the time. You should refer to the technical guidance for information about what you must do in that situation. Specifically, refer to the section, “How to account for the reverse charge” . The technical part also explains what goes on your VAT return (section 10), what to do if you use a VAT special scheme, e.g. cash accounting (section 11), and what to put on your invoices (section 14).

For a link to HMRC guidance on the domestic reverse charge, visit http://www.tips-and-advice.co.uk , Download Zone, year 22, issue 02.