27th Jan 2021
From March 1st 2021 the way Vat is collected in the construction industry is due to change. Currently subcontractors charge Vat on their services and then pay the Vat back to the government in their return.
Going forward supplier invoices will have to state they are applying the reverse charge and no Vat will be paid to them by the end user. Instead the end user will have to pay the Vat directly to the government. The aim is to increase collection of Vat from smaller subcontractors where companies are often closed before Vat is paid.
The most important requirement for applying the reverse charge is whether the transaciton is currently reportable under the Construction Industry Scheme. Importantly for us, the CIS scheme only applies for plant hire where there is an operator, self-drive hire is outside the scope. Therefore the vast majority of our hire will be outside the scope, although we will have to change how we invoice for operated hire.
In summary, we will apply the reverse charge if all of the following apply:
You work for a Vat registered company
You work for a CIS registered company
You are not an "end user" as defined by hmrc
Your hire needs an operator
More inforation can be found on the governmnt website below:
