CIS Reverse Charge

VAT Reverse Charge

New changes came into place at the beginning of March under the CIS Scheme.  As contractors, you will be required to deduct tax from subcontractor’s payments and pay it on to HMRC on their behalf. All contractors must register for the scheme before they begin carrying out work.  

If this applies to you, you may have to change the way you handle your VAT 

How do I know if I need to use reverse charge? 

We have created two flow charts for you to determine if you need to use reverse charge: 

If you sell building and construction services 

your customer is registered for VAT in the UK 

  • payment for the supply is reported within the Construction Industry Scheme (CIS) 
  • the services you supply are standard or reduced rated 
  • you’re not an employment business supplying either staff or workers, or both 
  • your customer has not given written confirmation that they’re an end user or intermediary supplier 

If you buy building and construction services 

Use this flowchart to help you decide if you need to use the reverse charge. The reverse charge will need to be used when: 

  • payment for the supply is reported within the Construction Industry Scheme (CIS) 
  • the supply is standard or reduced rated 
  • are not hiring either staff or workers, or both 
  • you’re not using the end user or intermediary exclusions 

What steps can you take now to prepare for Reverse Charge VAT? 

  • Ensure your software is updated. 
  • Ensure you or your accounts team are prepared for a 17% reduction in cash flowing through the veins of the business. 
  • You will need proforma reverse charge invoices and applications. 
  • You will need to warn your own VAT registered subcontractors. 
  • You will need to check if your customers are VAT registered, and CIS registered and if they are, check whether they are end users. 

We appreciate that all of this can be very confusing, we specialise in the construction industry and have been working with our clients to get them ready for this. 

If you would like some support on this, get in touch.