A client supplies and fits kitchens as a subcontractor for new build developers (typically 10-50 plots per site).
Up to now, the new build supply has been mainly zero rated with VATable appliances etc.
Two letters have come in from developers highlighting the new reverse charge with pointers to guidance and one has suggested that VAT should no longer be charged by my client at all under the new rules.
My understanding is that the new rules do not apply to zero rated new build contracts and HMRC VAT Reverse Charge Technical Guide point 16 says 'The reverse charge does not apply to standard rated items which are included in a zero-rated supply of building and construction services, for example the supply and incorporation of ovens and hobs' and 'The standard rate of VAT is due on the value of goods not ordinarily incorporated in new build housing. When these goods are supplied and installed in new build housing, the reverse charge does not apply and standard rate VAT should be charged.'
The letter is from the developer’s financial controller and says that invoices with VAT will be rejected from 01/03/21 ‘as they will be deemed to fall under domestic reverse charge rules’ so I want to make sure that my view is correct before going back to my client.
The letter is from a decent sized business…………so now doubting myself!