E-BOOK
The VAT Reverse Charge for Construction
What it is, when it applies, what it did to your cash, and what you can still do about that. Eight chapters, about ten minutes.
- Eight chapters: four on the rule, four on the consequences
- The six conditions, and the one your customer has to give you
- What March 2021 took out of your working capital, worked out
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Who this book is for
Subcontractors who have been invoicing without VAT since 2021 and never sat down with what it actually changed, and contractors who need to know what to tell their supply chain.
You are not sure when it applies
Six things all have to be true, and chapters two and three take them one at a time. The work has to be construction services within CIS, you both have to be VAT registered, the customer has to be CIS registered, the supply has to be standard or reduced rated, and they must not have told you they are an end user.
You are in a repayment position every quarter
If your sales carry no VAT and your materials do, that is the arithmetic of a repayment claim quarter after quarter. On a £25,000 a month business, moving to monthly returns releases about £5,000 rather than lending it to HMRC three months at a time.
You have not repriced since 2021
Then your quotes still assume working capital that is no longer there. Chapter five puts a number on it, and it is larger than most subcontractors expect because nobody ever saw it as theirs.
FACTS
What the change actually took
Before March 2021 you collected the VAT on every sale and held it until the return fell due. The average balance is the VAT arising each month times half the return period plus the payment lag, which on quarterly returns is about 2.7 months. On £25,000 a month that is roughly £13,700 that stopped arriving.
8 chapters
The rule, then what it cost
2.7 months
Of VAT you used to hold, on quarterly returns
FACTS
The notification is theirs to give and yours to chase
An end user or intermediary supplier notification has to be in writing, by post, by email or in the contract. Until it arrives the reverse charge applies and you must not charge VAT. The information sits with the customer and the risk of getting it wrong sits with you.