Pierce advises construction firms about major VAT changes

Published 13th August 2019

Local accountancy firm Pierce is warning construction businesses to be prepared for major changes to the sector as VAT reverse charges are set to be introduced.

The Blackburn-based business, is urging the construction industry to get ready for October 1, when new legislation comes into force, meaning customers receiving a service or goods under the Construction Industry Scheme (CIS) will have to pay the VAT due to HMRC rather than the supplier.

Only individuals and businesses registered for VAT in the UK will be affected.

The implementation will bring challenges to companies. Invoices will need to change meaning accountancy software will need updating and it may bring cashflow implications.

Businesses in the sector need to identify where they sit in the supply chain and inform sub-contractors of the legislation as it’s likely they won’t be aware of it.

Staff responsible for VAT accounting need to be familiar with the reverse charge and how it will operate, as errors could prove costly.

If the VAT is paid in error to a VAT registered sub-contractor, it is the construction firm’s responsibility to request a re-issued invoice and obtain a refund from the sub-contractor.

Ben Smith, director at Pierce, said: “VAT reverse charges will have a really big impact on the construction industry.

“My advice to any firms would be to find out how it affects them, communicate with suppliers and sub-contractors so they are aware of the legislation, and ensure that all back-office processes are in place ahead of October. This may also include the need for some cashflow planning.

“Genuine mistakes could prove costly for firms and there is a lot of uncertainty about the rules for existing contracts. If companies have any doubts about the processes, they should seek professional advice.”

Update Sept 2019 : This has now been delayed until October 2020!

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