The new VAT reverse charge system will affect subcontractors who provide their services to other contractors in the construction sector. Since the building must be used exclusively for eligible purposes, Charity A can issue a certificate to its contractor and reduce the construction work (and related materials) to zero. Your services are provided “under construction” if you: The VAT rate for construction and development projects can often be confusing, as the delivery can be charged at the standard rate (20%), the reduced rate (5%), the zero rate (0%) or the supply exemption. This article aims to summarise the underlying rules that determine the VAT rate to be applied. If you provide services before or after the physical construction of the building, they can only be considered closely related if there is a close connection between the time of their execution and the time of the physical construction of the building. Examples of end-users in the UK include traditional entrepreneurs registered for VAT or suspected of being subject to CIS regulation. These are typically not construction companies and can be found in retail, manufacturing, utilities and real estate investments, as well as public facilities. Property developers should also be end-users when they do not provide construction or construction services. Employment establishments are treated differently for the purposes of the reverse charge mechanism.
Supplies made by employment agencies (also known as employment agencies) are not subject to the reverse charge mechanism, even if these services fall within the scope of the GIS. Employment firms supplying construction workers are treated for VAT purposes as workers and not as construction and construction services. Multiple people may have “Built People” status, but “Built People” status is not transferred when you transfer ownership. Instead, each person must comply with the conditions of paragraph 4.5.1. For the purposes of construction, a charity must meet the criteria set out in paragraph 2.1 of VAT Notification 701/1. Input VAT paid on goods and services related to the tax for self-deliveries can be fully deducted, subject to the normal rules. For the purposes of reverse charge management, consumers and end-customers are referred to as end-users. These are enterprises or groups of enterprises that do not provide the construction and construction services in question, but are registered as ordinary companies or contractors for the CIS because they perform work or because the value of their purchases of construction services exceeds the threshold set for the CIS. For example, if the contractor reviews all works contracts with a subcontractor and finds that the reverse charge mechanism applies to more than 5 per cent of contracts (by volume or value) with that subcontractor, the reverse charge mechanism can be applied to all contracts. The rules preventing developers from deducting input VAT on goods other than building materials are set out in the VAT (input tax) Order 1992 (SI 1992/3222), Articles 2 and 6 (as amended by SI 1995/281).
For more information on the tax point rules for construction services, see Note 708: Buildings and Construction. The place of service directly related to land or real estate is where the property itself is located, regardless of where you or your client belongs. The place of supply of services (VAT assessment notice 741A) contains examples of services that are and are not directly related to land and immovable property. They should also refer to this notice in order to obtain detailed information on the place of supplies of works and other real estate services. It is not possible to draw up an exhaustive list of services closely related to the construction of the building, and each case not included in points (a) and (b) must be examined separately. Employment firms that place staff and are responsible for the remuneration of temporary agency workers they hire are not subject to the reverse charge mechanism. For more information, see Application of the national reverse charge mechanism for construction services to specific sectors or types of transactions. Examples of work not related to the construction of a building include: The builder hires a contractor to perform the design and construction elements of the project. If it appears from the contract that the services provided by architects, appraisers or other persons acting as consultants or supervisors are only elements of the cost of the contractor`s supply and are not specifically provided to the customer, the entire supply may be considered eligible for the zero duty. The national reverse charge mechanism (known as the reverse charge mechanism) is a major change in the way VAT is collected in the construction sector.
A classified building permit is not the same as a building permit. As a general rule, a listed building permit is required for work on a listed building that would affect its character as a building of particular architectural or historical interest. The construction of an extension or modifications after partial demolition would certainly require consent, but it is not possible to generalize about less radical works, especially with regard to internal changes. As explained in the section `Specified supplies`, it is unlikely that employment firms that place construction workers will be considered construction and construction services for VAT purposes. If you would like more information about the new VAT rules for the construction sector, please contact us using our contact details below: These rules do not apply if the building is demolished at ground level within 10 years of its completion. For simplicity, the definition of construction services concerned is largely the same as that applicable to the construction industry regime (CIS regime), but see below for more details. Finished or prefabricated kitchen furniture and materials for the construction of fitted kitchen furniture are building materials for VAT purposes if they are normally integrated into a building. Under the new rules, supplies of standard or discounted construction services between taxable businesses in the supply chain will not be invoiced normally. Under the reverse charge mechanism, a prime contractor would charge VAT on the services of a subcontractor and the supplier would not charge VAT. The customer (general contractor) would then offset the VAT against the net invoiced value of the supplier and at the same time deduct this VAT from the payment to the subcontractor.
Issuing a certified receipt does not create a tax point like a VAT invoice. If you make a supply under a contract that provides for periodic payments, the tax point is the date you receive the payment or, if the special anti-tax avoidance rules described in section 24 apply, the date you complete the work. The construction of a building intended solely for a relevant charitable purpose is zero, with additions to an existing building usually subject to a standard rate. But the addition (or, if only part of the addition is used exclusively for a relevant charitable purpose, that part) can be assessed as zero if all of the following conditions are met: for example, at some sites an assembly may be a developer, at other sites a contractor, and at both sites its status may change. Construction work carried out in connection with the construction of a `holiday home` `designed as a dwelling` shall be assessed as void if the conditions set out in point 3.1.2 are met. All construction work on an ordinary house or apartment not listed in the table above will always be valued at the current standard price. This includes, for example, any supply of such goods and services by the contracting authority on the basis of a profit planning agreement is not a supply for consideration, so that no VAT is levied on that supply. Therefore, the employer does not provide construction services under the Agreement and is therefore an end-user for the purposes of reverse charge.