Financial Advice
CHANGES TO VAT THAT YOU NEED TO BE AWARE OF!
Dean Flood
www.rowlandhall.co.uk
102
What are the new changes in relation to the reverse charges mechanism for construction and building services?
legitimately recover the input VAT as well as an effect of reducing the collectability of these taxes.
VAT registered business are normally required to charge VAT to their customers and then pay collected VAT monies over to HMR&C. The customer, if VAT registered, would typically recover the VAT in their own VAT return.
From 1st October 2019, some VAT registered building and construction services will become subject to the ‘Reverse Charging’ rules. Those rules mean that the supplier does not raise a charge for the VAT element of their invoices. However, the customer has to recognise the VAT element and show this as output VAT in their own VAT return, whilst at the same time recovering the input VAT that would have been charged by the supplier. The net effect is that the customer has essentially collected the VAT from the supplier on behalf of HMR&C.
HMR&C has identified that the construction and building industry has a higher than normal occurrence of traders who are charging VAT but failing to make the relevant declarations and payments to HMR&C. This has a knock on effect for the customers who are sometimes unable to
