AUGUST 2019 | 45
Business
Read online at www.proinstaller.co.uk
a reverse charge that applies to
transactions with EU countries
(while the UK remains inside
the EU) which you could call the
“international reverse charge”. The
customer (contractor) pays the
VAT, although they can still claim
the VAT back as now, subject to
the usual rules.
The DRC will apply to both
businesses and individuals that are
both registered for VAT and supply
or buy services that have to be
reported under the Construction
Industry Scheme (CIS). There is
no need to worry about this if the
service is zero-rated or the cus-
tomer is non-VAT registered. Simi-
larly, like CIS, it does not apply to
the final sale to the end customer
or to an agent representing them.
The HMRC guidance also
provides answers to a number of
other queries:
• Checking whether a customer
is an end user or the agent of
an end user
• The way to check if the con-
tractor is CIS and VAT regis-
tered
• How to complete VAT returns
with this change
• How to handle the change
when a contract spans the 1st
October 2019, covering the
issue where sales are raised
before 1st October 2017
Where a single contractor has
many contracts with a single
subbie this is a special case. If the
DRC applies to more than 5% of
those contracts (by value or by
number) the DRC may be applied
to all the contracts ignoring if they
would otherwise qualify or not.
HMRC advice is to:
• Check whether you are im-
pacted by the DRC – either
as a contractor or a subcon-
tractor
• Tell your counter-parties
about the change
• Make sure your system, if you
use one, will deal with the
DRC. Make sure your MTD
arrangements can also handle
the DRC
• Think about the impact of
DRC on cash flow. If you are
a subcontractor impacted by
DRC you may be hit by the
fact that you won’t receive
VAT payments which you can
hold for a while before they
have to be paid to HMRC
There has been a lot of criticism
of the way HMRC are implement-
ing this change. The detailed
guidance is very late while it had
been stated that there would be a
12-month lead time. This does not
help anyone.
The HMRC guidance can be
found by searching Google for
“HMRC vat domestic reverse
charge”.
In conclusion
Although the “deadline” for MTD
has passed, the reality is that the
likely trouble remains ahead. To
add the change in handling of VAT
between contractors and subcon-
tractors into the same timeframe
seems, to put it politely, a mistake.
Given that the detailed guidance
has come out barely three months
ahead of the deadline for imple-
mentation, this makes a very diffi-
cult situation even worse. All of this
potentially costs time and money
for long-suffering installers.
My final thought is to wish you
all the best in coping with this
tangled mess.
About the author
Benjamin Dyer is CEO and
co-founder of Powered Now. Pow-
ered Now’s mobile app aims to
take the pain out of paperwork for
plumbing and heating companies,
as well as other trade businesses.
www.powerednow.com