• Skip to primary navigation
  • Skip to main content
  • Skip to footer

07400 439071



  • Facebook
  • LinkedIn
  • Twitter
  • YouTube
ECommerce Accountants in UK

ECommerce Accountants in UK

Online Retail Business

  • Home
  • About us
    • Ecommerce businesses & Online Retailers
  • Services
    • Xero Accounting Experts
    • ECommerce accounting Experts
    • Full Book Keeping Department
    • Full Accountancy and Tax Services
    • High Level Business Advisory Services
    • App Advisory Services
  • Knowledge Hub
  • Customer Login
Contact Us

The Construction Industry Scheme (CIS) VAT reverse charge

December 21, 2020 by Ejaz Ul Haq

From 1 March 2021, the Construction Industry Scheme (CIS) VAT reverse charge will apply to construction services. So VAT registered businesses in the construction industry must ensure their systems and process are ready for that.

The charge applies to standard and reduced-rate VAT services:

  • for individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

What is the meaning of VAT reverse charge?

Well, normally a supplier charges VAT on all their VATable supplies to the customers. Let’s say your VAT supplies are £100 and you charge 20% VAT. Then your invoice should be £100+£20 = £120. You collected £20 VAT on behalf of HMRC.

You as a supplier is charging VAT. What if I say reverse this VAT charging process. That means, you will not charge VAT but your VAT registered customers will charge the VAT themselves. This is what it is all about.

How will the VAT reverse charge apply in Construction Industry?

So, if your are a VAT registered builder in the construction industry, you’ll only charge the £100 in above case from 1 March 2021. But there are certain key conditions for this new process to apply.

These conditions are as follows:

1- Both the customers and suppliers are UK VAT as well CIS registered.

So the reverse charging will not apply if your customer is not VAT registered for VAT and or CIS.

2) The supplies must be VATable, not the exempt.

3) The supplies must be constructions services and materials.

4) The supplies are not made to end customers.

That means the customer intends to make an onward supply of constructions services.

5) The customers and suppliers are not connected. For example supplies between the group of companies are connected party supplies.

What you’ll need to do?

  • Check if your customer has a valid VAT number.
  • Check your customer’s CIS registration.
  • Review your contracts to decide if the reverse charge will apply, and tell your customers.
  • Ask your customer to confirm whether they are an end user or intermediary supplier.
  • Find out how to record the reverse charge in your accounts.

HMRC has kindly issued two flowcharts as follows:

If you sell 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:

  • 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

Suppliers flowchart (PDF, 149KB, 1 page)

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

Buyers flowchart (PDF, 139KB, 2 pages)

If you need any help in setting you systems and to apply the correct VAT reverse charge in the constructions supplies, please contact us here

Spread the love

Category iconBlog posts

Subscribe to our newsletter

Get the latest posts delivered right to your inbox

Reader Interactions

The best and most cost effective accounting services

We have a mission to help you grow your business, not only by saving you money, but by giving you a forward road map to navigate your future.

Book a Call

Footer

ERAA Consulting Limited, Chartered Certified Accountants

We are a member firm of ACCA

Registered in England and Wales
Company Registration Number: 08573314
Registered Office: 7 Bell Yard, London, England, WC2A 2JR

 07400 439071

 Email

 Book a Call

Sitemap

  • Home
  • Knowledge Hub
  • Services
  • Login
  • Contact Us

Legal

  • Privacy Policy
  • Terms of Service
  • Disclaimer
  • Third Party Sites
  • Intellectual Property

Newsletter

Get the latest news, events and announcements straight to your inbox.

  • Facebook
  • LinkedIn
  • Twitter
  • YouTube
Copyright © 2022 ERAA Consulting Limited. All rights reserved. 