The reverse charge has now been in place long enough that most construction-related businesses will have done their first VAT return under it.
This means that we can now see how it’s working in practice, and a few common themes are coming out:

  • There’s some confusion over what counts as ‘construction operations’. CIS340 is HMRC’s go-to publication for this, and has a definitive list in Appendix A. ‘Definitive’ is a bit of a strong word, though, as some activities can be either construction or not, depending on the details.

  • HMRC are querying any VAT return that gives a repayment where they would have expected a liability under the old rules. This means that a lot of sub-contractors are getting delays before they get their VAT back. You can speed the process up by making sure you have the right information to hand so you can send it straight back to HMRC.

  • Many contractors are not telling sub-contractors whether or not they’re an ‘end-user’. If they don’t give you an end-user certificate then you have to use the reverse charge, even if you think they are one. It’s a good idea to get something in writing, though, even if it’s just an email saying ‘no, we’re not giving you an end-user certificate’.

  • Some subcontractors who are due repayments this year still have deferred VAT payments from last year. HMRC are supposed to make the repayments even if there are outstanding deferred payments, but in some cases they’re offsetting them. You’re entitled to get the repayments, so do push back if this happens.

As always in VAT, the rules can be complicated and it’s important to know which ones apply to your business. HMRC have been enforcing the rules with a light touch to for the first six months, but as of September they can be expected to be less sympathetic to mistakes.

If you have any questions on the VAT reverse charge (or anything else), please do get in touch.