Construction Industry VAT Domestic Reverse Charge

What is the VAT Domestic Reverse Charge?

The VAT Domestic Reverse charge was first announced by HMRC in 2017, in a move to combat VAT fraud in the Construction Industry Scheme (CIS).

An example of this type of fraud is when a contractor is paid via a Limited Company and bills for VAT, but then does not fulfil their own VAT commitments.  This type of fraud is widely seen and often involves inactive companies which are set up to steal VAT, whilst working alongside legitimate businesses.

It was initially due to come into play in October 2019 but was pushed back twice due to Brexit and Coronavirus. The new implementation date has been set as 1st March 2021. This will only affect businesses within the supply chain providing CIS services.

The change focuses only on Building or Construction services and will shift the responsibility for accounting for VAT on ‘specified services’ from the supplier to the recipient. The ‘specified services’ are noted in sections 5 and 6 of the Statutory Instrument for VAT Reverse Charge for Building and Construction Services. More information can be found here.

The VAT Domestic Reverse Charge will apply where:

  • CIS applies, AND
  • The services are not applied to a direct end user, AND
  • The services are listed within the services listed in article 5 and NOT listed within article 6 of the Statutory Instrument.

Points to Note

There are a few key points to note in addition to the criteria above; the charge can only affect the specified services between VAT registered companies, and there cannot be a connection between said companies i.e., if they’re in the same commercial group. Furthermore, only standard rate or reduced rate supplies will be affected.

So, what does this mean? 

This can be viewed as good news for Employment Businesses and Intermediaries alike as the latest government guidance states “employment businesses who supply staff and who are responsible for paying temporary workers they supply, are not subject to the reverse charge”. Implementation of the charge would likely have caused strain on cash flow and result in significant changes to the business in procedure. With that said, it’s still important to be aware of the upcoming changes as it may impact the supply chain in such a way that you could still be affected.

We’ve included a flowchart below, detailing how the charge will work and to help you determine whether you should apply the domestic reverse charge or not.

Want to find out more? Our friendly, knowledgeable team are on hand ready to help if you believe that the new VAT domestic reverse charge rules apply to your business. Contact us today to discuss what we can do for you.

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LinkedIn used to be a network specifically for recruitment, but in recent years, it’s become an essential business tool for everyone, whatever industry you’re in or level your position is. Although it may seem a daunting task, curating your LinkedIn profile is quite simple, and will help you achieve your business goals while increasing your reputation. In this blog, we share our five top tips for using LinkedIn to your advantage and becoming a pro!  

1- 500+.  

This may seem like an arbitrary number, but it is essential that you have at least 500 connections on LinkedIn. This shows potential employers or clients that you are serious about your work, and legitimate within your industry – so start connecting! And don’t worry, LinkedIn only shows numbers below 500 OR 500+, so once you’ve hit that sweet spot, you can sit back and relax. 

2- Activity.

 Stay active! Simply take 10-15 minutes a day to see what people are up to on LinkedIn, click the reaction button, or even comment. This shows the LinkedIn algorithm that you’re a serious member of the community, and you’ll have more people seeing your profile as a result.  

3- Tag.

 One of the best things you can do for yourself on LinkedIn is tag, tag, tag! Every time you post, or comment, tag someone relevant (bonus if that someone has a lot of connections). This will pin your post or comment to their profile as well as yours, allowing your action to be seen by hundreds more. 

4- Accuracy.  

Keep your account up to date. This means a photo of you that’s less than two years old (be wary of selfies), job info that is completely up to date, and accurate location information – this is the only way that your community on LinkedIn will know what you’re up to, so it’s very important to stay on top of this.  

5- Ask for help. 

Ask your connections to endorse your skills on LinkedIn, or even leave a quick review of your service on your profile. This shows other users that you can be trusted and that you’re great at what you do! 

Staying on top of your LinkedIn can seem like a chore, but we promise you’ll reap the benefits if you stick with it. All you need to do is follow these five simple steps, and you’ll be well on your way to growing your business and cultivating essential connections across the platform. 

The Red Ark team are here to help you through all stages of your business.  

Contact our friendly, knowledgeable staff today to discuss what we can do for you.  

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