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Domestic Reverse Charge Construction

Domestic Reverse Charge Construction

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A client has a plumbing business that is contracting to a large property company through two separate divisions dealing with new build installations and property maintenance.

The property maintenance work involves the standard call outs for leaking pipes, changing taps etc.

My understating is that this work is not within the CIS scheme so the reverse charge cannot apply.

The client is being asked to invoice this maintenance work with reverse charge VAT.

Have I got this wrong?

 

Replies (11)

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chips_at_mattersey
By Les Howard
31st Mar 2021 13:58

I think the services you describe do fall within the DRC.
Further, where your client has provided a letter as described, that protects the supplier.

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By peterpaice
31st Mar 2021 14:09

The post isn't clear enough are the property company the end customer or are they a letting agency.

If end customer charge vat.

If not reverse charge (assuming they are vat registered

Thanks (1)
Replying to peterpaice:
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By CWservices6064
31st Mar 2021 17:17

My client is subcontracting to a contactor providing property maintenance services to existing residential householders and businesses operating from commercial properties.

I guess my question really comes down to whether or not replacing/repairing leaking taps and radiators is within the CIS scheme.

I assume that if 'yes' then DRC applies and if 'no' it can't.

Thanks (0)
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By Paul Crowley
31st Mar 2021 14:30

Has the repair work been through CIS

If trader is gross, How would he know without asking?

I would be amazed if it was not

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Replying to Paul Crowley:
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By CWservices6064
31st Mar 2021 17:19

My client has gross payment status.

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By CWservices6064
31st Mar 2021 16:34

Hello,

I was thinking that the work was outside of CIS so could not be subject to the DRC.

https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-re...

Repair of systems
The legislation regarding building service systems only refers to their installation. Therefore, repairs to any of these systems are outside the scope of CIS. Soldering a leaking pipe or patching a leaking boiler, replacing a defective tap, rewiring a single defective circuit, replacing a burned-out ventilation fan motor, replacing a broken wash basin, fixing a leaking radiator or replacing standard radiator valves with thermostatic valves, are all plainly repairs to a part of the overall building system.

Even where the repaired/replaced item may represent a significant component part of the overall system, such as a central heating boiler, its replacement does not constitute ‘the installation of a system of heating’ and therefore will not fall within CIS.

Repairs/replacements to building service systems will be caught, if they are carried out as part of a mixed contract of works, for example, a payment under a single contract to repair both a broken gutter (normally excluded) and replace broken roof tiles will all be caught under the scheme.

...........have I got this wrong a CIS point ?

Thanks (0)
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By CWservices6064
31st Mar 2021 16:34

Hello,

I was thinking that the work was outside of CIS so could not be subject to the DRC.

https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-re...

Repair of systems
The legislation regarding building service systems only refers to their installation. Therefore, repairs to any of these systems are outside the scope of CIS. Soldering a leaking pipe or patching a leaking boiler, replacing a defective tap, rewiring a single defective circuit, replacing a burned-out ventilation fan motor, replacing a broken wash basin, fixing a leaking radiator or replacing standard radiator valves with thermostatic valves, are all plainly repairs to a part of the overall building system.

Even where the repaired/replaced item may represent a significant component part of the overall system, such as a central heating boiler, its replacement does not constitute ‘the installation of a system of heating’ and therefore will not fall within CIS.

Repairs/replacements to building service systems will be caught, if they are carried out as part of a mixed contract of works, for example, a payment under a single contract to repair both a broken gutter (normally excluded) and replace broken roof tiles will all be caught under the scheme.

...........have I got this wrong a CIS point ?

Thanks (0)
chips_at_mattersey
By Les Howard
31st Mar 2021 17:22

General point: the Domestic Reverse Charge (DRC) is not the CIS reverse charge. As I understand the VAT legislation, whether supplies fall within CIS does not determine whether or not the DRC applies.
'Excepted services' are not services which are not 'specified services.'

Thanks (1)
Replying to leshoward:
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By CWservices6064
31st Mar 2021 17:32

Thanks, I was using the following HMRC flowchart:

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

.................sounds like I may have totally misunderstood this?

Thanks (0)
Replying to CWservices6064:
RedFive
By RedFive
31st Mar 2021 17:47

CWservices6064 wrote:

Thanks, I was using the following HMRC flowchart:

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

.................sounds like I may have totally misunderstood this?

I don't think you have.

I agree with you. It is not a CIS deductible service and therefore the reverse charge does not apply.

So no change to how they operated previously.

Thanks (1)
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By paulwakefield1
31st Mar 2021 18:18

FWIW a rather good ICAEW 30 minute webinar yesterday said that, amongst other conditions, at least 5% of the supply had to fall within CIS for DRC to apply.

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