From 1^st October 2019, all businesses that are VAT-registered and work in the building and construction sector need to be aware of and ready to collect VAT under the new rules.

The domestic reverse charge has been put into place by the HMRC to reduce fraud within the sector. There have been many errors in VAT payments that need to be rectified. 

Services affected by the VAT domestic reverse charge

The VAT domestic reverse charge only applies between VAT registered businesses and does not affect sales to consumers. It will affect you if you supply or receive services that are reported under the Construction Industry Scheme (CIS).

For the purpose of CIS, construction work includes:

• preparing a site, e.g. foundations and providing access
• demolition and dismantling on a site
• building work of any kind
• alterations, repairs and decorating of properties
• installing systems for heating, lighting, power, water and ventilation
• cleaning the inside of buildings after construction work

How will the VAT domestic reverse charge affect your business?

 The domestic reverse charge will mainly affect contractors and sub-contractors.  In simple terms, responsibility for paying VAT will sit with the buyer of the product or service instead of the person that is selling.

To prepare for the change, contractors need to review all contracts with suppliers and sub-contractors and check if the reverse charge applies.

Sub-contractors need to inform all customers if the domestic reverse charge will apply. It's essential to understand if a customer is an intermediary supplier or end-user.  We have written a separate blog to explain what this means – Understanding construction and building services suppliers.

You may need to check if your accounting systems and software are ready to deal with the change. Plus check the impact this will have on your cash flow.

More detailed information can be found by clicking here - VAT: domestic reverse charge for building and construction services.

We support many clients in this sector and are aware that this is a significant change coming into play at very short notice. If you are in the building and construction services sector and you want to discuss how it will affect your business then contact us by calling 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it..