As green businesses in the construction industry, it’s important to understand the Domestic Reverse Charge VAT, a regulatory change implemented to combat fraud. Let’s explore its key aspects and implications for eco-conscious enterprises.

Domestic Reverse Charge VAT shifts the responsibility of reporting and paying VAT from the supplier to the customer for specific construction services. Effective from 1 March 2021, this measure aims to address missing trader fraud.

While the Domestic Reverse Charge VAT presents challenges, it also offers opportunities for green businesses. Adjustments to accounting processes may be required, but it streamlines VAT compliance and reduces fraud risks.

The Domestic Reverse Charge VAT is applicable to specific services, except in the following circumstances:

1. When the services are provided to an end user, such as the property owner, or directly to a main contractor who sells or rents out a newly completed building.
2. When the recipient of the services further supplies them to a company that is connected to the end user.
3. When the recipient is not registered for VAT or is not required to be VAT registered.
4. When the recipient is not registered for the Construction Industry Scheme (CIS).
5. When the supplier and recipient have a landlord-tenant relationship or vice versa.
6. When the supplies are zero-rated for VAT purposes.

 

The Domestic Reverse Charge VAT is an important risk area for green businesses in construction. By adapting processes and seeking expert advice, eco-conscious enterprises can align financial operations with their environmental goals of low risk and well managed finance.