From the 1st March 2021, the CIS VAT Reverse Charge came into play for all VAT-registered construction workers and firms. The implementation of the charge comes following delays due to the ongoing pandemic and Brexit, but it is finally here. The charge will affect all VAT-registered firms and workers within the construction industry. If this includes you, we recommend you brush up on exactly what that means for your business and your team. Whether you are self-employed or part of a larger organisation, here is everything you need to know about the CIS Reverse Charge.
What is the CIS Reverse Charge?
The Construction Industry Scheme (CIS) Reverse Charge VAT changes the way that some construction workers invoice for and collect VAT on the services they provide. Under the previous rules, an applicable invoice would cover labour and materials, plus VAT at a rate of 20%. However, under the new rules, an applicable invoice would just cover the labour and materials, excluding the VAT.
How will invoicing work under the CIS Reverse charge?
When issuing an invoice using the new rules there is no need to worry, as all of the usual rules around invoicing will still apply. The only difference is that VAT should not be added to any applicable work. This will need to be declared on the invoice, alongside the amount of VAT that would have been charged.
Under the new rules, any applicable invoices would not need to be included on the worker’s VAT return, as no VAT was paid. However, the client may need to make changes on their own VAT return.
When will it be applied?
The new CIS Reverse Charge can be applied across a range of services. This includes:
- construction work
- alterations
- repair work
- installation of heating
- installation of lighting
- installation of air-conditioning
- installation of a power supply
- installation of drainage
- installation of water supply
- installation of fire protection systems
- scaffolding work
However, there are exceptions to the CIS Reverse Charge. The charge does not apply to:
- drilling or extracting oil or natural gas
- extracting minerals
- manufacturing building/engineering components or equipment
- delivering materials to a site
- professional work (such as architects or surveyors)
- installation of seating, blinds and shutters
- installation of security systems
Please note that this list is not comprehensive. Some tasks can fall under the CIS Reverse Charge if they are part of a supply chain where other workers have used the charge.
Can you help?
If you are unsure whether or not the scheme will apply to you and your work, then we’re here to help.
If you have any questions or want to know more about what it means for you, then get in touch.
Give us a call on 01484 441431. You can also email us on hello@itsrelative.co.uk. We’re here to help.