Under new rules due to come in on 1 October 2019 builders, sub- contractors and other trades associated with the construction industry will have start using a new method of accounting for VAT.
Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the reverse charge, a main contractor would account for the VAT on the services of any sub-contractor and the supplier does not invoice for VAT. The customer (main contractor) would then account for VAT on the net value of the supplier’s invoice and at the same time deduct that VAT from the payment to the sub-contractor.
This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors.
The new reverse charge will apply to a wide range of services in the building trade, primarily those activities covered by the construction industry (CIS) payment rules. Note that normal VAT invoices will continue to be issued to domestic customers.