Domestic Reverse VAT charge

Supply received from a subcontractor not registered under CIS

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A VAT and CIS registered client has received an invoice from a subontractor including several £000's in VAT. My client is not an end user, so I would expect the subcontractor to apply the reverse charge rules. The subcontractor claims he does not have to apply the DRC rules, as he is not CIS registered. (The works are within the scope of CIS and my client will be reporting the payment via CIS). Do both parties have to be CIS registered for the DRC to apply?

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By Paul Crowley
07th Sep 2021 15:46

" The subcontractor claims he does not have to apply the DRC rules, as he is not CIS registered. (The works are within the scope of CIS and my client will be reporting the payment via CIS)."
I would be looking to sort out the brackets first
Contractor should not be letting subbie on site without UTR being checked for tax deduction.
Stopping 30% tax and 20% VAT could be the start of an agument

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Replying to Paul Crowley:
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By LANCEARMPONG
07th Sep 2021 15:59

The subbie has been verified as 20%.

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Replying to LANCEARMPONG:
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By doubletrouble
07th Sep 2021 16:06

LANCEARMPONG wrote:

The subbie has been verified as 20%.

Well then they are definitely CIS registered and DRC applies

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Replying to LANCEARMPONG:
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By Sandnickel
07th Sep 2021 16:09

If he is verified then he is CIS registered.

To answer the question though, no the subcontractor does not have to be registered for CIS. The contractor has to be registered and the work has to be within the scope of CIS to apply DRC.

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Replying to LANCEARMPONG:
RLI
By lionofludesch
08th Sep 2021 07:24

LANCEARMPONG wrote:

The subbie has been verified as 20%.

Subcontractor is talking nonsense, then.

Presumably this anomaly has been put to him. What did he say?

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By DKB-Sheffield
07th Sep 2021 19:20

LANCEARMPONG wrote:

The subcontractor claims he does not have to apply the DRC rules, as he is not CIS registered.

So, a classic example of the 'tail [subcontractor] wagging the dog [contractor]'. Nothing new!!!

The reworded version of the quote is...

Quote:

The subcontractor claims he does not WANT THE CONTRACTOR to apply the DRC rules, as he CLAIMS HE is not CIS registered.

What subcontractors fail to understand is that a couple of minutes spent performing the verification exposes their untruths! A non-CIS registered subcontractor will almost certainly produce a '30% deduction response'!

What always surprises me is that subcontractors hate having CIS deducted but love the rebate they inevitably receive if they primarily carry out labour-only subcontracted work. Furthermore, the number of times I've seen subcontractors charge day rates of £225 to 'cover their tax' (instead of £180)... but that's another story!!

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Replying to DKB-Sheffield:
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By lionofludesch
08th Sep 2021 07:30

Ha - yes - there's a roofer round here who just invoices for "£500 + 20% tax" the tax meaning his CIS tax, not VAT. Everybody knows what he means and he's tolerated because he just doesn't understand CIS and he's a good roofer and a good worker.

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Replying to lionofludesch:
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By doubletrouble
08th Sep 2021 14:54

lionofludesch wrote:

Ha - yes - there's a roofer round here who just invoices for "£500 + 20% tax" the tax meaning his CIS tax, not VAT. Everybody knows what he means and he's tolerated because he just doesn't understand CIS and he's a good roofer and a good worker.

Hopefully if any of his clients are accountants they may enlighten him

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Replying to doubletrouble:
RLI
By lionofludesch
08th Sep 2021 15:07

doubletrouble wrote:

Hopefully if any of his clients are accountants they may enlighten him

Not going to happen.

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