Building and construction sector need to be aware of incoming VAT reverse charge requirements15/02/2021
From 1st March 2021, many companies in the building and construction industry will have to start using the VAT reverse charge. The VAT reverse charge is a new way to handle VAT which has been designed to eliminate fraud, and is essentially an extension to the Construction Industry Scheme (CIS). It applies to all individuals and businesses registered for VAT, applies to standard and reduced-rate VAT services, and is reported within with the CIS. It is imperative that all businesses that could be impacted refer to the government’s published list to check when (and if) they should start using the VAT reverse charge.
According to HMRC, the introduction of the VAT reverse charge will help fight organised crime in the construction sector. At present, some businesses charge VAT for services then disappear without paying their VAT bill (pocketing an additional 5% to 20% which doesn’t belong to them). This lets these businesses provide work at cut-price rates that damage competitiveness in the market whilst also escaping with an outsized profit. Moving the VAT charge down the supply chain should make this kind of fraud impossible – so although it will require some adjustments on the way we pay VAT, it should benefit all companies in the sector.
At JW Hinks, we are fully prepared to handle VAT reverse charge. All of our systems, staff, and software are capable of handling the change, and we want our clients to be too. That means considering whether this new VAT process will impact your cash flow – and, if it does, figuring out a way to deal with it. We are happy to discuss this, or any other aspects of the VAT reverse charge that our clients would like more information on, or help with.
If you are not a JW Hinks client, then you will have more work to do, and should immediately check that your accounting systems and software can handle the reverse charge. You will also need to ensure that all staff responsible for VAT accounting understand the reverse charge and how it works. If this sounds like too much trouble, we would urge you to contact us as soon as possible and enquire about becoming a client. Remember, these changes take effect from 1 March 2021.
Whether you are an existing client or a prospective one, you can get in touch with us on 0121 456 0190, or via the contact form on our contact page.