You may have already heard about the new ‘VAT reverse charge for building and construction services’ rules coming into effect on 1st March 2021, you may already know all about it or you might have arrived here to find out more!
The new rules are summarised below, which will hopefully help you understand your new responsibilities.
The main point to remember is that the rules apply to works which fall under the scope of CIS with both the contractor and subcontractor being VAT registered – if you don’t fall within the scope of CIS then they do not apply to you!
In summary the new rules mean that any payments made to subcontractors or payments received from contractors who fall within the scope of CIS will not have VAT on them, even if the parties involved are VAT registered. Instead, the invoice should clearly state that it is a reverse charge invoice.
The VAT is then calculated at the point of payment and included within the next VAT return.
Works which fall outside of the scope of CIS should be processed and paid with VAT calculated as normal.
Working for a Main Contractor
If you are a subcontractor, you likely invoice a main contractor for works which fall under the scope of CIS. In this case, from 1st March your invoice to the main contractor should not show any VAT. instead the invoice should clearly state that it is a reverse charge invoice. The Main Contractor will then account for the VAT on their VAT return.
Paying Sub Contractors
This rule needs to be noted when you are paying Sub Contractors for works which fall under the scope of CIS. A VAT registered subcontractor will need to invoice you for services without VAT and clearly state that this is a reverse charge invoice. It is then your responsibility to account for the VAT element of this invoice on your next VAT return.
There are a couple of exceptions to the above new rules which include:
End Users – if you are invoicing an end user, including those who receive building or contraction services within the scope of CIS but do not supply those services on and use the building themselves, the new rules do not apply. This would also be the case if you use subcontractors for a project on your own business property (as you are then classed as the end user).
Zero rated contracts – if you are working on a zero rated contract the new rules do not apply as there is no VAT to calculate.
More info can be found in this article: https://www.rossmartin.co.uk/vat/vat/4137-construction-industry-vat-reverse-charge-at-a-glance
As always with changes like this, we’re here to help you so please don’t hesitate to get in touch!
When anyone looks back at 2020, it’s going to be impossible to not mention Covid-19. We’ve had, like many businesses, had to adapt to having some staff working from home & different working conditions when we are in the office. We’ve had to add services, such as processing furlough claims, offered lots of advice on the ever changing government announcements and worked hard to ensure our clients have received as much support as possible.
Away from all of that, we’ve still managed to grow – we started 2020 with a team of 3 and end it with a team of 8. We’ve expanded in all areas of the business, in our accounts & bookkeeping teams and now with dedicated support staff to assist wherever required.
One area we’ve seen growth is our virtual accounts department, especially in relation managing payments for our clients, taking away the need to monitor those bills that must be paid on time and helping to manage the cashflow of the business.
We’re hoping to continue this trend in 2021, not just in terms of the easy to measure numbers, such as clients and profit, but in growing PBATS, ensuring all staff expand their knowledge to improve the support and advice we give.
Happy New (calendar) Year!
So last week we did a little message on our various social media accounts (Facebook, twitter & Instagram for those not following us) just giving a heads up that this weeks blog would be a copy of our analysis on the latest government support for businesses during the COVID-19 pandemic. However, I am going to back track a little! Let me explain….
So in the past week we’ve had a lot of feedback from our clients who we’ve emailed our advice out to, thankfully all positive! Everyone has found our analysis very useful as it’s allowed them to carry on running their business and have it all summarised by someone who knows what is relevant to them, a lot easier to read than sifting through the various statements that we did (Ok, another honesty moment, it was mainly Martin!). We covered the Self Employment Income Support Scheme (SEISS), Bounce Back Loans, VAT & Personal Tax payments.
But, we’ve decided to not just pop it on our blog, as we’d like to know who else finds it useful, so would like to know who else is reading it, so if you’d like a copy just send us an e-mail and we’ll send you a copy across.
|Cost of item||Sales price||Profit||Net VAT to pay to HMRC|
|Before registering for VAT||£50.00||£10.00||£100.00||–||£40.00||–|
|Registered – sell for same plus VAT||£50.00||£10.00||£100.00||£20.00||£50.00||£10.00|
|Registered – sell for same inc VAT||£50.00||£10.00||£83.33||£16.67||£33.33||£6.67|
|Registered – same profit as before||£50.00||£10.00||£90.00||£18.00||£40.00||£8.00|
My (not so) little boy has recently got into watching Mythbusters on TV and it got me thinking about some accounting and bookkeeping myths that I thought I’d tackle (not in the same way as the TV program if you’ve seen it!).
Myth – You can put all your food & drink through as an expense
HMRC disagree with this, as they see food and drink as something you need to live (understandably!) so you can’t claim it as an expense. What is allowed is the cost of basic food & drink for your staff, including free meals at a canteen, as long as they’re available to all – this doesn’t apply if you are the only employee/director. When you’re travelling for work you can claim for food & drink, including overnight stays. If you’re travelling to a temporary workplace then you can claim, such as a temporary work site or a meeting.
Myth – You can claim for your clothes you where for work
This one isn’t as clear to bust, as you can claim for a uniform you purchase and any clothing that features the company logo. PPE is also an allowable expense, but that nice pair of shoes you’ve brought yourself are not going to be justifiable!
Myth – Having your books done by a bookkeeper/accountant is expensive
I’d love to say that this myth is busted but it’s actually down to personal opinion – we certainly don’t believe it’s expensive, especially if it’s freeing up your time to expand your business and do what you do best (or just to give you your weekend back to spend with your family) – it’s essentially the same as any business expense, if you feel the service is worth the cost then it’s worth it!
Myth – Dividends are classed as an expense
A lot of people seem to think that dividends are taken out of the profit before corporation tax is paid like an expense would be but this is incorrect, they are drawn on the profit after it has been taxed.
Myth – VAT should only be registered for when you have to
The final myth is a bit of a trickier one, as it varies from business to business, there’s no one size fits all answer. One major concern will be the effect it will have on your customers – if they are other businesses already registered for VAT then although they’d physically (well probably not actually in this day & age) give you more money they’d be claiming the VAT back so it won’t change for them. If you’ve non VAT registered companies or the general public then they would feel the effect of the increase if you just add VAT to your prices so it would then be up to you to decide if you were going to swallow some or all of that increase. So the myth isn’t busted but isn’t confirmed either!
Is there any you’d like to add? Email us and let us know and we’d be happy to do a second myth busting!
Over the last few months we’ve had a few changes within the team at PBATS, here’s a quick round up of all the changes!
James joined the team at the start of June, working on the accounts side of the business. He’s MAAT qualified with a background in Not for Profit accounts and will be working with Martin day to day.
Charlotte has changed roles, now in the role of Accounts Junior. She’s working towards her AAT level 2 qualification while developing her bookkeeping knowledge.
Finally we’ve had Becky join the team as an Admin Assistant – yes, this could cause some confusion having a Becky & a Rebecca but we’re coping so far!
Martin, Susan and myself are all still here in the same roles as before.
The most important thing for our clients is that these changes will result in a better service for you, with more knowledge in the team and increased capacity to ensure we’re always here to support you and your business, your points of contact are remaining the same so no changes there!