TT274: New Rules for the building trade planned in 2019

With new rules due to come into force on 1 October 2019 builders, sub-contractors and other trades associated with the construction industry will have to start using a new method of accounting for VAT.

The new rules are designed to combat fraud in the construction sector labour supply chain.

HMRC argue that currently significant tax losses are suffered by them in this area and have recently published draft legislation introducing the reverse charge for construction services.

Under the proposed new rules, supplies of standard or reduced – rate building services between VAT registered business in the supply chain will not be invoiced in the current normal way.

Under the reverse charge method a main contractor would account for VAT on the service of any sub-contractor, without the need for the supplier to submit a VAT invoice.

The customer (main contractor) then accounts for VAT on the net value of the supplier’s invoice and at the same time deducts that VAT – leaving a nil net tax position.

This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors.

THOSE AFFECTED

The reverse charge will apply to a wide range of services including, but not limited to:

  1. Construction
  2. Alteration
  3. Repairs
  4. Demolition
  5. Installation of heat, light, water and power systems
  6. Drainage
  7. Painting and decorating
  8. Erection of scaffolding
  9. Site clearance

EXCLUDED WORKS

Professional services of architects, surveyors or consultants in building, engineering, interior or exterior decoration or in the laying out of landscape are not covered by the new rules.

It is anticipated that this new legislation will be finalised by October 2018 so businesses have at least 12 months to make the necessary changes to their business systems.

Don’t get left behind with these changes, if you think your business is affected by these new rules then contact your local partner for more information.

Talk to Barnes Roffe today
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