Subcontractor to Contractor supplies within the construction industry will be subject to Reverse Charge VAT from 1 October 2020. This applies to a subcontractor supplying services to a contractor (not supplies to an individual or end user business such as an office or hotel). The subcontractor will continue to raise an invoice but will not charge VAT. Instead the subcontractor will state on the invoice “Subject to Reverse Charge VAT”. The recipient of the services and invoice will then raise reverse charge VAT when they record that invoice in their records. HMRC are making this change to stop the situation where one building business reclaims VAT on an invoice but the business raising the invoice never pays the VAT to HMRC.
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us.