Reverse VAT charge

The reverse VAT charge was initially due to be implemented in October 2019 but was delayed until October 2020 to allow businesses more time to prepare.

What is the Reverse VAT Charge and how does it affect me?

The reverse VAT charge is a change to way that VAT will be accounted for in the building and construction industry. Otherwise knows as the domestic reverse charge, it is a change to the way that VAT is collected (with the intent to reduce tax fraud).

Currently it is the responsibility of the UK supplier to account for VAT. The changes move this responsibility to the customer, who will in turn be required to pay for the VAT and then recoup through its own VAT return.

Unlike CIS, the reverse VAT charge applies to whole of the service (including materials). Zero rated services will not be affected, nor will non-VAT-registered customers, or even end customers in the supply chain.

In the coming months, businesses are advised to prepare for the following

* Is your accounting software capable of registering the reverse charge

* Are your staff adequately trained in the changes

* Do you know the VAT status of your customers

* Will your cash flow cope with the changes

For more information, visit https://www.gov.uk/guidance/the-vat-domestic-reverse-charge-procedure-notice-735

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