This site uses cookies to improve your browsing experience and analyse use of our website. By clicking ‘I accept’ you agree and consent to our use of cookies. You can find out more about our cookies here. Find out more

How to prepare for incoming CIS VAT reverse charge changes

How to prepare for incoming CIS VAT reverse charge changes

Jonathan Green

With the continued changes coming from HMRC to the building and construction industry, there is yet another major change on its way which will affect both customers and suppliers who are CIS and VAT registered. 

From the 1 March 2021, contractors and subcontractors registered for VAT and the Construction Industry Scheme will need to use the VAT reverse charge process for building and construction services. VAT registered subcontractors affected by this change will no longer add VAT to their invoices to contractors. Instead, the contractors’ accounting system will need to add the deemed VAT to their VAT return on behalf of subcontractors, and at the same time, deduct the same amount as input VAT on the same return.

Contractors will only pay their VAT registered subcontractors the VAT-free amount invoiced, and as the reverse charge adjustment increases both input and output VAT by the same amount there is no cash penalty for either party. This new process will only apply to certain types of services provided by subcontractors.

While this might sound complicated, most accounting and bookkeeping software should be able to cope with these changes. If you are not confident that your software is suitable, or feel you are affected but don’t know what your next steps should be regarding these changes, please get into contact with your local Moore (South) Team.