The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This note deals with the VAT treatment of supplies made to specific industries that either make or receive building and construction services and whether those services come within the scope of the domestic reverse charge that came into effect from 1 March 2021. This note should be read in conjunction with the Domestic reverse charge ― supplies of building and construction services ― overview, Domestic reverse charge ― supplies of building and construction services ― VAT compliance and Domestic reverse charge ― accounting requirements guidance notes.
HMRC has introduced a 5% disregard that enables small levels of reverse charge services to be ignored when supplied with goods and services that are not liable to the reverse charge.
Normally, HMRC would expect that if any services provided are subject to the reverse charge, the reverse charge will apply to the whole amount. However, if the services liable to the reverse charge represent 5% or less of the total value of the supply, none of the supply is liable to the reverse charge, and the supplier will account for VAT in the normal way. This is called the 5% disregard.
See Example 1 and Example 2.
Supplies of construction labour made by employment businesses are not subject to the reverse charge, even if those supplies come within the scope of the Construction Industry Scheme (CIS). This is because, for VAT purposes, employment businesses supplying construction workers are treated as supplying staff rather than building and construction services.
If the construction firms are parties to a joint venture and provide workers on secondment to work on that joint venture project, any payments made by the joint venture to each construction firm to pay for those staff members, is not payment for construction services and therefore not subject to the reverse charge.
A labour only subcontractor is responsible
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