VAT reverse charge on building and construction services

Edit – September 2019 – these measures deferred until 1 October 2019
Edit – June 2020 – deferred to 1 March 2021

Find out when the reverse change is coming in.

 As highlighted previously, the reverse charge measure on building and construction services comes into effect on 1 October 2019.

The key aspects are:

• it will apply to standard and reduced-rated supplies of building and construction services made to VAT registered business, who in turn also make onward supplies of those building and construction services
• the scope of supplies affected is closely aligned to the supplies required to be reported under the Construction Industry Scheme, but does not include supplies of staff or workers
• the legislation introduces the concept of ‘end users’ and ‘intermediary suppliers’. This covers businesses or groups of associated businesses that do not make supplies of building and construction services to third parties and as such are excluded from the scope of the reverse charge if they receive such supplies. Examples include landlords, tenants and property developers.

The guidance on invoicing states:

Single payment contracts

If the building and construction service you are providing is under a single payment contract, the tax point is the date that the service is performed or completed. However, if you issue a VAT invoice or receive payment before the service is performed or completed, VAT is due on the date of the invoice or receipt of payment (whichever is earlier).

If you issue a VAT invoice within 14 days of the service being performed or completed, VAT is due on the date of the invoice.

Find more information about tax points in paragraph 15.3 of Notice 700.

For invoices issued for specified supplies spanning 1 October 2019 that become liable to the reverse charge, the VAT treatment for invoices with a tax point:

• before 1 October 2019 – the normal VAT rules will apply and you should charge VAT at the appropriate rate on your supplies
• on or after 1 October 2019 – the domestic reverse charge will apply.

 Transitional supplies for authenticated tax receipts or self-billed invoices

For authenticated tax receipts or self-billed invoices the tax point is normally the date the supplier receives payment.

The table below explains the transitional arrangements for how the VAT treatment is determined for payments due on any supplies entered into your accounting system before 1 October 2019, but paid on or after 1 October 2019.

Retention payments

The tax point for the retention element of the contract is delayed until payment is received or a VAT invoice has been issued for it (whichever is earlier).

The treatment of VAT for retention payments is covered in the main What a tax point is section.

Further information on the scope of the reverse charge and how it will operate can be found in this guidance note

Article from ACCA In Practice