***EDIT: Since time of writing, the Reverse Charge VAT scheme has been delayed till 1st October 2020.***
Introduction to Reverse Charge VAT Scheme.
As from 1st October 2019, if any work you do comes under the Construction Industry Tax Deduction Scheme (CIS) then it will come under the ‘Reverse Charge VAT Scheme’.
If you have done work under CIS then you will come under the Reverse Charge VAT scheme, however this would be subject to the exemptions mentioned below if you:
- Do not charge VAT on the sale, and
- Quote the customers VAT registration number on your invoice, and
- Say on the invoice that this invoice is subject to the Reverse Charge scheme and that the customer should be declaring the VAT
But, to clarify, the rules don’t apply if:
- The contract is a zero-rated contract anyway, or
- The customer is an end user, or
- The supply is for goods only, or
- The customer is not registered for VAT
If you receive one of these invoices from your supplier, then the invoice from the supplier is entered as VATable, but with no VAT! The VAT amount needs to be added into Box 1 and also Box 4 on the VAT Return. This is very similar to what is done with invoices received from Europe at the moment. The difference is that the VAT from a European invoice goes into Box 2, and this VAT shouldn’t. Box 2 of course could well be removed after Brexit.
Bearing in mind it is coming in on 1st October 2019, HMRC have been very slow in providing information, I think this is because we are still reeling from the changes made by MTD.
One of the biggest outstanding question in everyone’s mind is: “How do we get these figures into the right boxes on the VAT Return?” This is a question which hasn’t as yet been answered by the main book-keeping software providers. We intend to ask Xero, Sage, and Quick-books for clarification and will keep you posted with their answers. If, however, you are using any other software, we recommend you ask this question to your software provider as soon as possible.
Chris Pittock | Senior Partner
Telephone: 01793 686 454
Hinton Abbott Accountants