{"id":60610,"date":"2019-07-24T12:56:46","date_gmt":"2019-07-24T11:56:46","guid":{"rendered":"https:\/\/www.pbctoday.co.uk\/news\/?p=60610"},"modified":"2019-07-24T12:56:46","modified_gmt":"2019-07-24T11:56:46","slug":"new-vat-rules-in-construction","status":"publish","type":"post","link":"https:\/\/www.pbctoday.co.uk\/news\/planning-construction-news\/new-vat-rules-in-construction\/60610\/","title":{"rendered":"Steps to get ahead of new VAT rules in construction"},"content":{"rendered":"

With the clock ticking until new VAT rules come into force, the independent pre-qualification service Constructionline<\/a> \u2013 which works with 50,000 SME suppliers and 4,000 buying organisations has produced a helpful guide for those businesses which are affected<\/h2>\n

The cashflow of 150,000 SME construction<\/a> firms could soon be squeezed, when Government introduces a shake-up of VAT rules.<\/p>\n

From October 1 2019, HMRC is introducing a new system, which means VAT cash will no longer flow between VAT-registered businesses in the construction supply chain.<\/p>\n

Background to the VAT change<\/h3>\n

Construction firms have processed their own VAT for decades. Many SMEs use repayments from customers as a source of working capital before sending sums to HMRC.<\/p>\n

Unfortunately, fraudsters took advantage of the system, claiming back millions of pounds-worth of VAT from customers before \u2018disappearing,\u2019 without re-paying the money to Government.<\/p>\n

What is happening?<\/h3>\n

In a bid to tackle the crime, HMRC is introducing a new \u2018domestic reverse charge\u2019 for construction firms who provide specific services under the Construction Industry Scheme<\/a> (CIS). It also applies to the provision of goods, where that forms part of a package of works covered by CIS.<\/p>\n

Under the new arrangement, from October 1 2019, suppliers throughout the whole supply chain will need to issue domestic reverse charge notices to purchasers, highlighting which of their transactions would be subject to VAT.<\/p>\n

Companies which serve end-users (clients) at the end of supply chains (this is likely to apply to main contractors) will effectively charge themselves VAT sums on behalf of suppliers, and recover the same VAT through their VAT returns, subject to normal rules. These companies will then charge VAT at the appropriate rate to the end-user (clients) in the normal way.<\/p>\n

Who is affected?<\/h3>\n

The new VAT reverse charge<\/a> only applies to:<\/p>\n