The Construction Industry Domestic Reverse Charge

Important notice for businesses working in the construction industry and associated trades

With effect from 1 March 2021, how businesses in the construction industry and associated trades invoice and report VAT on transactions where they are acting as a sub-contractor or using a sub-contractor has changed.

The domestic reverse charge has been brought in as an anti-avoidance measure which requires the customer who receives the services to account for the VAT due on these services on their VAT return rather than the supplier of the services.

You must use the reverse charge if you meet ALL of the following conditions:

  1. You are VAT registered
  2. You supply or buy construction industry services to sell on
  3. The services you buy or sell are reportable within the CIS scheme (specified service)
  4. The services are subject to 20% or 5% VAT; and
  5. You are NOT providing services to an end user

An “end user” is a consumer or final customer for Reverse Charge purposes.

The Isle of Man Government has produced a useful helpsheet to provide further guidance, including changes that might need to be made to invoices prepared under the reverse charge scheme and how both the seller (sub-contractor) and buyer (main contractor) should account for the transactions on their VAT return.

The helpsheet can be found here https://www.gov.im/media/1371040/construction-industry-reverse-charge-information-leaflet.pdf

If you require further assistance or have any questions in relation to this please give one of the team a call on 679524.

Stephen Jackson, and the Harding Lewis Team

 

Disclaimer:

Please note that the information provided is believed to be correct at the time of writing and is subject to change. If you believe you may be affected by the contents of this newsletter then you should get in touch with our team straight away to discuss how it might affect your business.