What are the new VAT rules for CIS registered businesses?

Information about the new VAT rules for affected businesses and individuals in the construction sector.

construction worker doing paperwork

A VAT domestic reverse charge now needs to be applied on supplies to building and construction companies of services that fall within the scope of the Construction Industry Scheme.

If you are a CIS registered construction business, you now have an obligation to understand the Domestic Reverse Charge.

A reminder of the new VAT rule for CIS registered businesses…

The new rule, which came into force from March 1st 2021, is called ‘the domestic reverse charge for supplies of building and construction services’. It affects sub-contractors supplying their services to other contractors in the construction sector.

If you are a VAT registered subcontractor who supplies qualifying services to other construction industry contractors, you now have to show the correct rate of VAT on your invoices to contractors, but no longer charge it.

The contractor must now account for the VAT direct to HMRC by deducting from any payments relating to labour they make to subcontractors.

The Possible Effects

The effects of these changes on the sector will be significant. Businesses will most likely experience cashflow problems, not to mention the hidden costs that could accompany the changes to accounting systems for those who don’t have the right support in place.

Get support for regarding the VAT Reverse Charge

Cottons London is part of Cottons Chartered Accountants. Our parent firm has written a full article on the subject. To find out more about how the VAT domestic reverse charge works, how it affects you and what you need to do about it; read the full article, including some in depth and free downloads here.

Get in touch

If you are looking for a CIS specialist accountant in London then get in touch with our branch direct for support with accounting, tax returns and VAT filing.

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