Before the introduction of the Domestic Reverse Charge (DRC) for construction services, HMRC said that it applied to all construction services that were reportable under CIS. From the VAT side of HMRC this was dealt with, rather sweepingly as “all supplies of construction services”. The intimation being very much that “construction service = CIS”.
However, since the implementation of DRC (1 March 2021), there have been several issues that have highlighted where certain services may fall into the definition of a construction service, but are explicitly excluded from CIS.
Examples include spoil being transported off site (although spoil moved about on a single site is within CIS), and works to existing lifts.
Despite HMRC’s view that if in doubt apply DRC, a number of clients have been told by their customers that they won’t be paid unless they are invoiced “correctly”.
Therefore, if you’re being challenged by a customer that the supply should not be invoiced using DRC, it may be worthwhile establishing if the supply is seen as falling within CIS.
The other most common issue we are seeing is where the recipient is an “end user” but has not informed the supplier of the fact, so receives an invoice showing DRC has been applied.
Stories have yet to emerge about how HMRC are addressing issues of errors and non-compliance but once they do we will make sure they’re made known.
If you have any questions regarding the impact of DRC on your VAT records, payments, etc. please contact Ian Marrow.
If you have any questions about the above, or would like more information specific to your circumstances, please enter your email address below and we will get in touch: