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Post Info TOPIC: CIS and VAT Reverse charge


Guru

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CIS and VAT Reverse charge


Afternoon all,

I meant to post something about this a while back but it slipped my mind but just seen it mentioned again in an article so thought I would make sure that people are aware of the changes that seem to be on the way.

It seems that from October 1st 2019 businesses involved within the Construction Industry will have to change the way in which they charge for VAT with HMRC introducing the Reverse Charge which in brief will mean that a sub-contractor will no longer charge VAT for their services but the contractor will apply the reverse charge.

I have included the HMRC link but would be interested to hear others thoughts on this and how they think it may affect their clients especially concerning cash flow.

https://www.gov.uk/government/publications/vat-reverse-charge-for-building-and-construction-services/vat-reverse-charge-for-building-and-construction-services

Cheers



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Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Master Book-keeper

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Hi Doug

Thanks for raising this. I have 2 clients this will affect, but other than their having to adjust cash flow wise, I don't think it will be too detrimental to them.

In general though, doesn't this shift the problem one level higher? My client invoices his client, who will both operate the reverse charge and then invoice the main contractor who will also operate the reverse charge etc. Nothing to stop an organised crime gang moving one level higher which is the alleged reason why this legislation has been introduced.



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John

Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



Master Book-keeper

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Hi Doug
Thanks for adding the link for the forum users to understand the changes.

I agree with John - it just shifts the problem/wont stop the crime gangs. Also it doesnt even stop the small business that ignores the whole process anyway. Key with any legislation is in policing it and HMRC dont do anywhere near enough to police the CIS issue and could actually make more on this then I reckon they will from the ridiculous nonsense that is MTD!

I dumped all my CIS clients a long while back so doesnt affect any of mine, but can imagine it will cause the honest ones some problems.

Who said tax was taxing?



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Joanne

Fallows Hall Ltd

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.



Senior Member

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Thanks Doug, bit of light reading for me as I'll need to get my head round this one :(

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Janet

They keep making the system idiot proof but then make bigger and better idiots!



Guru

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Hi all

Totally agree about it just moving the problem up, maybe HMRC think its only the smaller businesses that commit crime!

Its the cash flow that I think is going to impact the smaller businesses the most as I know (even though they shouldn't) that they rely on the VAT money to help with the day to day running of the business.



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice



Veteran Member

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Thanks for spotting this Doug. Very useful... :)

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Mike



Senior Member

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ARGH!

Read this three times - am I reading it right.

We are a medium sized middle man companywith Gross CIS status. We work for Main Contractors on large projects and also engage smaller specialist sub-contractors. We also undertake small works for domestic and commercial clients (like shops and restaurants)

So when a subbie invoices us they won't add VAT onto their invoice but we will have to pay the VAT on their behalf (with our usual VAT return?) And when we invoice our Main contractors the same will happen?

Does it apply to gross and standard rate subbies?


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Julie



Guru

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Date:

pictures wrote:


ARGH!

Read this three times - am I reading it right.

We are a medium sized middle man companywith Gross CIS status. We work for Main Contractors on large projects and also engage smaller specialist sub-contractors. We also undertake small works for domestic and commercial clients (like shops and restaurants)

So when a subbie invoices us they won't add VAT onto their invoice but we will have to pay the VAT on their behalf (with our usual VAT return?) And when we invoice our Main contractors the same will happen?

Does it apply to gross and standard rate subbies?


Hi Julie,

My understanding is that it does not matter what the CIS status is only that they are VAT registered and the services that they are providing are covered by the Construction Industry Scheme

Subbie will invoice you (no VAT) and you will apply the reverse charge at the correct rate, you will invoice the contractor (no VAT) and they will apply the reverse charge

The reverse charge does not apply for services provided to end user clients like private homeowners, shops and landlords, you apply VAT normally to these

That's how I have been reading it



__________________

Doug

These are only my opinions of how I see things and therefore should not be taken as advice

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