Four queries on new domestic reverse charge rules for builders
Are the VAT domestic reverse charge rules for the construction industry working well? Neil Warren considers four questions he has received from accountants.
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Neil,
Notwithstanding your point regarding retentions. If the original invoice was gross and the customer witheld 5% retention. The retention then becomes payable after DRC. The DRC is not applicable as tax point was the original invoice date, surely.
An interesting but slightly concerning scenario I am currently dealing with is one where a client's supplier has refused to ever register for the CIS scheme. Apparently trading for many years this way. My client has received an invoice from them with VAT charged at 20% and challenged it.
The key part of the HMRC flowcharts which my customer is using as an argument is Q2: Is the supply received within the scope of CIS.
The services they are supplying do fall within the scope of CIS, regardless of whether the supplier is actually registered for it, but more clarity is needed by HMRC because my client is being met with "it just says I need to be registered for CIS in order for DRC to apply, which I'm not".
Sigh.
What would make more sense is that all vat registered business do not charge vat between themselves. The only charge is to customers that aren't vat registered. Solves the problem, considering VAT is not supposed to be a tax on business.