Domestic reverse charge is coming soon

A massive shake-up to the way VAT is collected across the construction industry supply chain is just days away.

The domestic reverse charge comes into effect on March 1 and a last-minute reprieve is looking unlikely.

HMRC sent letters to thousands of CIS-registered businesses over the last six weeks warning them about the new rules. The taxman said the twice-delayed introduction means the industry has had plenty of time to prepare and should not expect any further postponement.

Ian Anfield, managing director of Hudson Contract, said specialist subcontractors will likely be hardest hit by the reverse charge and should take steps now to protect their cash flow. He is advising companies follow a series of simple steps to get ready:


Go through the new rules with your accountant or bookkeeper and make sure they have processes in place to deal with them

  • Determine whether the reverse charge applies to your relationships with your customers and notify them if you think it does
  • Determine whether the reverse charge applies to your relationships with your suppliers and notify them if you think it does
  • Produce an accurate and reliable cash-flow forecast
  • Move to monthly VAT returns if you haven’t already done so
  • Make sure you get valuations agreed and invoices in before March 1 to collect VAT on existing projects
  • If all this still leaves you in the red, consider restructuring to supply different services from individual limited companies under separate contracts with your clients.

Alternatively, pick up the phone and contact Hudson on 0844 488 1871, the only construction industry compliance provider with case law in its name. Ian and his team are working with hundreds of businesses to help them get ready for the new rules, which come just weeks before IR35 - more red tape for the sector.


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