We wanted to update you about the VAT Domestic Reverse Chare scheme as this is being enforced from 1st March 2021. We have previously written articles about this, and you may want to refer back to these for more background and how this will impact your business.
VAT Domestic reverse charge for building and construction services – 2019
Changes to the VAT Domestic reverse charge - 2020
Hopefully, you are ready for this change to come into force next week, but if not, here are a few points you need to consider in preparation.
- The domestic VAT reverse charge must be used for most supplies of building and construction services. The charge applies to standard and reduced-rate VAT services:
- For individuals or businesses who are registered for VAT in the UK
- Reported within the Construction Industry Scheme
- make sure that you fully understand the following so you can take action:
- Understand when you need to use reverse charge on sales and purchases
- If you supply services, find out how this will work going forward
- If you buy services, find out how this works for you
There are many detailed webinars that you can watch on the GOV.UK website, click here to access these webinars.
Do you have accounting software in place?
If you are already using accounting software to manage invoices and VAT, you are already in a strong position. If not, then speak to us, and we can advise you on what to use. Most software, including Xero, Sage, QuickBooks and FreeAgent, will help you remain compliant and make processes easier for you and your team.
How will the change affect your cash flow?
The flow of VAT payments into a business is sometimes treated as a boost to cash flow until the next VAT return when payment of VAT is made. The change to the way VAT is collected may impact some businesses, and they need to start preparing for a reduction in cash flow.
Do all your staff know how the reverse charge will work?
You may have several people in your team that are issues invoices or handling payments. It would help if you made sure everyone in the team understands the new processes that are put into place to achieve and retain compliance.
We understand that this will be a challenging time for businesses in the building and construction sector. If we can help in any way, please contact us.
You can call 01623 490 120 or email