Are You Ready For Reverse Charging?

Burflex House, Clay Street, Hull, East Yorkshire, HU8 8HA E. info@burflex.co.uk

Burflex House, Clay Street, Hull, East Yorkshire, HU8 8HA E. info@burflex.co.uk

Are You Ready For Reverse Charging?

Are You Ready For Reverse Charging?

New legislation relating to tax for the building and construction sector is set to be brought in come October 1st, so if companies in the industry aren’t prepared now could well be the time to make it a focus.

Known as reverse charging, the changes were first announced in the Autumn Budget back in 2017, designed to prevent criminal attacks on the VAT system and missing trader fraud.

What it means is that the customer in receipt of the service in question will have to pay the VAT due on the work to HMRC, instead of paying the supplier directly. The change will only apply to those registered for VAT in the UK.

In order to prepare for the introduction date, companies should check to see if the charge affects their sales, purchases or both, make sure accounting systems and software are up to date so they can deal with the reverse charge, see if the change will have an impact on cash flow and ensure that all employers who are responsible for VAT accounting are familiar with the change and how it will work.

The government is advising contractors review all contracts with sub-contractors so they can decide if the charge will apply to the services you receive under their contracts. If it will, suppliers will need to be notified.

Sub-contractors, meanwhile, will need to get in touch with their customers to seek confirmation that the reverse charge will apply, including confirming if the customer is an intermediary supplier or an end user.

You will have to apply the reverse charge if certain services are supplied, such as constructing, altering, extending, repairing, dismantling or demolishing buildings or structures, working on pipelines, reservoirs and water mains, heating and lighting installation, and more.

There’s no need to panic in particular at this point if you’re not as prepared as you’d like to be, since HMRC has said that it will apply a light touch if any mistakes are made in the first six months of the changes being brought in – so long, of course, that you’re trying to comply and have acted in good faith.

If you’re not sure as to whether the reverse charge will apply to the services you and your business provide, your first step should be to seek professional advice on the issue, whether that’s from a VAT specialist or HMRC itself.

It’s also worth remembering that the reverse charge could already be affecting projects that your business is working on now if they end after October 1st. If this is the case, reverse charge invoicing will apply.

For help with scaffolding in Leeds, get in touch with the team here at Burflex today.