Domestic Reverse Charge – What does that mean for you?

Whilst we enjoy writing our articles on the nature of working as an accountant and the accounting industry (and we hope you enjoy reading them), there’s always room to be made in any Quarterly Update for important tax news that will affect any of our clients!

This time around, we’d like to talk about the new Construction Industry Reverse charge (or Domestic Reverse Charge) that’s coming into effect on 1^st October. The new charge will affect the way that any VAT-registered construction business pays taxes, so it’s definitely something to have on your radar.

The basic summary of the changes to the system are from October onwards, any business receiving services that fall under the Reverse Charge will pay VAT on the service directly to HMRC. Under the previous system, customers would pay VAT to the supplier, who would then pay HMRC. The primary effect of the change is that with the customer paying VAT directly, the customer is the one who can reclaim any VAT refunds, rather than the supplier.

The change won’t affect every construction business out there (and there’s a list of specific business types that are excluded), but if you provide or receive any construction services, you need to make sure you’re complying. If you’d like to know about the changes being made in detail, you can find guidance on HMRC’s website, or of course speak to your AIMS Accountant!

Find your local AIMS Accountant today.