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Domestic reverse charge and sub contractors

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Hello, I'd like to understand how we should be receiving invoices from our sub-contractors from 01-Mar-21

Our customers are a mix of end users where no reverse charge is applicable, and others where the reverse charge does apply.

We have a number of sub-contractors that we use, and we submit CIS submissions when we pay them. 

My question is does the reverse charge apply for ALL invoices received from our VAT registered subbies?  What if the job they are doing for us is for one of our customers that is an end user?  Would we have a scenario where a subbie may have to submit some invoices to us with reverse charge, and some not?

Thanks

Paula

Replies (8)

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By Moonbeam
22nd Jan 2021 10:02

It looks as if you haven't checked out this article:

https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and...

This is well written, and I would recommend you read it along with any links.

Thanks (2)
Replying to Moonbeam:
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By Paula Harper
22nd Jan 2021 10:24

Hello thanks for replying. I have indeed read the HMRC guidance and many articles but I cannot find the answer to my particular question, hence reaching out. :-( I think I may contact HMRC directly.

Thanks (0)
Replying to Paula Harper:
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By Youareatit
22nd Jan 2021 10:35

Dont ask HMRC anything. You will not necessarily get a right answer. You will get 2 different answers in 2 different calls.

Get a VAT specialist on board to give you some advice to set you up correctly for the future. Worth their fees as it will save you in penalties and the mess you could make.

A couple of them on here. Les Howard and Jason Croke. Look them up and send them a PM.

Thanks (3)
Danny Kent
By Viciuno
22nd Jan 2021 12:12

Forgive me if I'm on the wrong track here (it's been a while since I looked at this) but is the condition RE the end user not to do with who the contractor is working with.

So your invoices may not be within the scope of the reverse charge as you may supply to an "end user" however your subcontractors are supplying to you, the main contractor who is not an end user, so their payment is subject to the reverse charge when the other conditions are met.

Thanks (2)
Jason Croke
By Jason Croke
22nd Jan 2021 12:38

Viciuno is correct.

Have you seen this technical document here (it should open to the section where there is a flowchart) https://www.gov.uk/guidance/vat-reverse-charge-technical-guide#flowcharts - click the "suppliers" link.

You read the flowchart as the person making the supply, so when you read it you are making a supply to an end user so your invoice is plus VAT to end user. If I am a sub-contractor reading this flowchart, my customer is you, you are not an end user (question 5), so my supply falls under the reverse charge (assuming all the other conditions of the flowchart are met).

Hopefully that will help you....oh and don't call HMRC, your own limited knowledge will be ten times more accurate than anything the helpline will give you. Even if you knew nothing at all, you'd still possibly have slightly more knowledge than the helpline crew, they are truly, truly appalling for anything other than basic stuff like filing deadlines.

Thanks (2)
cd
By Chris Downing
22nd Jan 2021 14:09

Sage have just updated their article on the legislation change and how it applies. I hope this provides some clarity:
https://www.sage.com/en-gb/blog/vat-reverse-charge-construction/

Thanks (0)
chips_at_mattersey
By Les Howard
22nd Jan 2021 17:08

All excellent comments above.
We are advising contractors to write a standard letter to their sub-contractors in good time, to avoid the problem with subbies charging VAT after 1 March and then having to adjust them and possibly falling out with the main contractor.

Thanks (1)
Replying to leshoward:
By Moonbeam
22nd Jan 2021 17:12

I'm having to talk to all my CIS people as a few of them don't think it applies to them, when of course it does.
I've got a standard letter written for them to send to their sub-contractors. Of course the subbies will also think nonsense - this doesn't apply to me.
But what else can we do?

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