cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Get your Payroll questions answered by a QuickBooks Product Manager here - https://intuit.me/31Nl3My
JackS
Moderator

VAT Reverse Charge For Building and Construction Services (CIS)

 

 

From 1 March 2021, the domestic VAT reverse charge must be used for most supplies of building and construction services.

 

 

The charge applies to standard and reduced-rate VAT services:

  • for individuals or businesses who are registered for VAT in the UK
  • reported within the Construction Industry Scheme

 

 

How does QuickBooks help me? 

From 01 March 2021 QuickBooks will have 2 new VAT codes (20% & 5%) that customers will be able to use to account for the VAT reverse charge. Once the code has been selected and the transaction is saved, QuickBooks will automatically account for the reverse charge and the VAT will be reflected on your VAT return; you do not need to amend or adjust your return. 

If you are an existing customer and have enabled VAT & CIS then you do not need to set up anything. You will only need to enable and select the VAT code to apply it to invoices or bills. 

*To use the VAT reverse charge for construction you must enable VAT & CIS in QuickBooks. 

 

 

Do I need to pay additional charges to use the CIS reverse charge for construction in QuickBooks? 

No, there are no additional charges. Learn more about QuickBooks and the plans we offer https://quickbooks.intuit.com/uk/pricing/ 

 

 

What is the VAT domestic reverse charge for construction services?

The VAT domestic reverse charge for building and construction services is a change in how VAT is handled for certain kinds of construction services in the UK along with the building and construction materials used directly in those services (although it doesn’t apply to building and construction materials supplied separately and independently of any construction services).

 

The VAT reverse charge for construction is effectively an extension of the Construction Industry Scheme(CIS) and applies only to transactions that are reported under the CIS and are between VAT-registered contractors and sub-contractors.

 

To simplify this even further for services a sub-contractor provides they will require the contractor employing them to handle and pay the VAT directly to HMRC.

The payment received will be for the cost of the work done (plus materials used), net of any CIS deductions for tax and National Insurance but no VAT will be paid on the invoice.

 

 

What if my construction project begins before the reverse charge but ends after it comes in?

It will depend upon when the tax point is. In most cases, this will be the date of issue of the VAT Invoice, or the receipt of payment – whichever occurs first.

 

“Time of Supply” rules apply for prepayment. If a prepayment was made then it will be the date that the supplier received payment and if there is no invoice or the invoice was issued 15 or more days before the work is finished then it will be the date that the work was finished.

If the tax point is on or after 1 March 2021 then the reverse charge should be applied. If the tax point is before that date, current VAT rules apply.

 

 

What VAT rates does the VAT reverse charge for construction services apply to?

It applies to both standard and reduced-rate VAT supplies. It doesn’t apply to zero-rated supplies.

 

 

What do I do if the VAT reverse charge for construction services doesn’t apply to the services I provide?

Normal VAT rules will apply, which is to say, you should invoice for the VAT and account for it in your VAT return.

 

 

What construction services does the VAT reverse charge apply to?

According to HMRC, You must use the reverse charge for the following services:

  • constructing, altering, repairing, extending, demolition, or dismantling buildings or structures (whether permanent or not), including offshore installation services
  • constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks, and harbors, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defense
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, or fire protection systems in any building or structure
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension, or restoration
  • painting or decorating the inside or the external surfaces of any building or structure
  • services which form an integral part of, or are part of the preparation or completion of the services described above - including site clearance, earth-moving, excavation, tunneling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping, and the provision of roadways and other access works

 

 

What is exempt from the VAT reverse charge for construction services?

Do not use the charge for the following services, when supplied on their own:

  • drilling for, or extracting, oil or natural gas
  • extracting minerals (using underground or surface working) and tunneling, boring, or construction of underground works, for this purpose
  • manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
  • manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, or fire protection systems, or delivering any of these to the site
  • the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
  • making, installing, and repairing artworks such as sculptures, murals, and other items that are purely artistic signwriting and erecting, installing, and repairing signboards and advertisements
  • installing seating, blinds, and shutters
  • installing security systems, including burglar alarms, closed-circuit television, and public address systems

 

 

Does the VAT reverse charge for construction services apply to work provided for home/domestic individuals?

No. It only applies to VAT-registered businesses registered for the CIS. If the services are provided for non-VAT-registered individuals or other kinds of ordinary non-business individuals then standard VAT rules apply.

 

 

Is Making Tax Digital for VAT affected by the VAT reverse charge for construction?

Making Tax Digital only changes how businesses submit their VAT returns and how VAT is accounted – both of which must be done digitally using functional compatible software and hence it has no direct impact on the VAT reverse charge other than the fact any reverse charges must be recorded digitally, along with the rest of your VAT. 

 

 

17 REPLIES 17
JL25
Level 2

VAT Reverse Charge For Building and Construction Services (CIS)

I am using QB desktop - will these VAT codes be updated for desktop users too for Construction Reverse Charge or will you publish steps how to set the codes up?  Thanks

Ashleigh1
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

Hello JL25, 

 

Thanks for commenting on this post, 

 

This link here will help you on how to set up a VAT code in desktop. 

JL25
Level 2

VAT Reverse Charge For Building and Construction Services (CIS)

Thanks Ashleigh but these are the Brexit codes for imports and exports not DRC VAT?

Ashleigh1
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

Hi JL25, Sorry about that,  so having had a look into this more, it is currently getting worked on at the moment, and have had no update yet, soon as we get an update we will let our customers know, but hopefully it should be ready soon for our customers. 

accounts377
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

We currently run QB online using Cash accounting for VAT. This new scheme requires accrual accounting.

Will we have to change all our accounting over to Accrual for Vat? 

Or will this be handled somehow internally within QB? 

EmmaM
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

Hello Accounts377, we have updated this link with a FAQ on how the new codes will be handled for  the new domestic reverse charge by QuickBiooks Online.

accounts377
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

Thanks. I've read all that and it doesn't exactly spell it out, but reading between the lines I am assuming that the relevant invoices will be dealt with at the correct tax point and I won't have to change my whole accounting over to Accrual basis? Can you please confirm that - it doesn't exactly say. 

EmmaM
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

Hello Accounts377, we have reached out to the product engineers who wrote the QB article on the domestic reverse charge for absolute confirmation. After looking at HMRC guidance there is nothing to stipulate you have to be on accrual that we can see. As you say the article states you do not need to do anything and it will be dealt with in QB when the code is selected. We wanted to make sure we came back to you with a yes or no for sure  but do not want you to think we are not looking into it for you which is why we are responding now. As soon as we have an update we will add it to this thread.

EmmaM
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

To continue on from the post above we have had confirmation as follows regarding accrual. That as long as the transaction is accounted for on a standard basis it does not matter if you are on cash accounting. If you use cash accounting then the invoices/bills you raise will be on standard accounting when using the new CIS RC codes it has been built that way so that it accounts correctly. I hope that helps.

accounts377
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

Thank you. 

That makes life easier! 

MATI GSM LTD
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

Hi, could you please provide us with an Example of an invoice how the VAT reverse charge will appear. Thank you

EmmaM
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

hello MatI GSM LTD, we have not got access to the non live version to post an example here, however what we can do is arrange expert to go through it with you this afternoon on the non live version so you can see what it will look like?😊

Lesw
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

Hi Emma are QB going to have an invoice template update, so the reverse charge can show just below the vat charged. This way the client can see the reverse charge

DivinaMercy_N
QuickBooks Team

VAT Reverse Charge For Building and Construction Services (CIS)

Thank you for posting here, @Lesw.

 

At the moment we aren't creating templates because different approved references can be used on the invoices - we also have two places where these can be added on the 'Message on Invoice' or 'Footer' and you can add your references there.

Hampshire1
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

As recommended, I have used the CIS Gross (0%) but when I look at the VAT report, it is not showing on either the sales or purchases, I thought the VAT should show in both hence "reverse charge".

Luke Crowther
Level 1

VAT Reverse Charge For Building and Construction Services (CIS)

Hi, 

 

We have been using Quickbooks for some years now.  We are an Industrial Roofing & Cladding company, Limited, VAT registered and fall within the scope of CIS.  In most instances, we are the intermediary user - meaning that we will no longer be collecting the VAT but we will be showing this on the invoice.  Occasionally, we are the End User when dealing directly with private clients who do not fall within the scope of CIS and will be collecting VAT as normal. 

 

All of my clients setup on Quickbooks have always been effortlessly when creating invoices, purchase orders etc.  We do not really use Quickbooks for the purpose of our quarterly VAT returns as we have an accountant that deals directly with this.  Quickbooks is just a tool we use to generate & track invoices and Purchase Orders for projects alike. 

 

One of the main issues I am seeing since the VAT Reverse Charge came into play on March 1st 2021 is not being able to invoice our clients (contractors) when selecting 20% RC VAT.  Instead, we are now seeing CIS being included on the invoices, which we have never included before. 

 

This would have been fine if we were sub-contractors (not Limited, not VAT registered) as we pay CIS for our employees/sub-contractors, not the construction companies we work under. 

 

We also want to display the VAT amount for the overall invoice, but for it not to be included in the invoice total.  This will avoid any errors when invoicing our clients that are under CIS and will be collecting our VAT under the new 20% RC VAT.

 

What can we do to show the 20% RC VAT without having to then add the CIS as well?

 

It seems you have overly complicated this by adding CIS to the equation when all Limited/VAT registered sub-contractors invoice without showing any CIS.  We are responsible for our own sub-contractors CIS and stop 20% when they are paid weekly/fortnightly.  

 

There needs to be an option for construction companies like mine where we do not collect or stop CIS from other construction companies. 

 

The invoices need to be as normal, with the option of 20% RC VAT which then shows the amount of VAT at the bottom but is NOT included in the sub-total due. 

Rose-A
Moderator

VAT Reverse Charge For Building and Construction Services (CIS)

Hi, Luke Crowther. I can share some information regarding using the 20% VAT reverse charge and CIS feature in QuickBooks Online.

 

When using the new 20% Reverse Charge VAT, you would also need to apply the CIS product or service item. This way the system will automatically account for the CIS items. (edited) 
 

If you wish to show the 20% RC VAT without adding the CIS, I'd suggest getting in touch with our QuickBooks Support. They'll be able to provide an alternative way on how to calculate and use the VAT rate without using the CIS item.

 

For your VAT and CIS references, you can go through the following articles below. These will provide you steps about grouping your VAT rates as well as how CIS works in QuickBooks.

 

CIS in QuickBooks.

Set up and edit VAT settings, VAT codes, and VAT rates.

 

Let me know it goes as I want to make sure you're able to use the 20% RC VAT. I'll be here to keep helping.