From 1st October 2020, VAT registered subcontractors will no longer charge VAT on certain construction services provided to contractors.
Instead, the customer (contractor) will ‘self-account’ for any VAT due – this is known as the reverse charge.
This means the subcontractor, would not show any VAT on their invoice to the contractor but instead notate on the invoice that it is ‘subject to the Reverse Charge’. The contractor would reclaim VAT as normal but would also show the VAT due on their VAT return; rather than the subcontractor declaring it on their VAT return.
The reverse charge will only apply to standard and reduced rated services, so zero rated services are unaffected.
More information on this can be found here.
We would be happy to discuss your affairs in more detail and can look after your bookkeeping needs and/ or complete your VAT return for you.
We can also look after your CIS returns to HMRC and supply payment and deductions statements to your subcontractors.