The Construction Industry Scheme was devised so that contractors are able to deduct money from the payment of subcontractors and pass across the tax to HMRC. We are able to monitor all these with the help of our payroll experts.
The VAT Domestic Reverse Charge Scheme
New VAT accounting procedures for those in the field of construction have become more and more complicated since March 2021 because new layers of rules and regulations have been added for the compliance of building contractors. This, therefore, makes planning ahead all the more essential.
Simply put, all VAT-registered construction businesses that supply and receive services reported under the CIS undertake the following:
- Avail of other builders’ construction services and make an onward supply of these services to another customer. For instance, when a subcontractor invoices the main contractor for a specific task, the main contractor must invoice the end user, which is the customer in this case.
- Sells Construction and building services to other builders where these builders make an onward supply of the services to their own customer.
When in doubt: Typically, if the recipient is VAT-registered and all payments are subject to CIS, reverse charges must apply.