New VAT rules are coming into force from 1st October 2019 to create a domestic reverse charge for Construction, known as Construction Services Domestic Reverse Charge.
HMRC are introducing the change to combat missing trader fraud.
VAT registered construction clients will need to account for reverse charge as it was a self supply, the supplier won’t charge them VAT. This then removes the risk of deducting input tax when the output tax has never been paid.
The new system will not apply to Zero Rated Supplies.
Unlike some other “reverse charge” schemes, amounts accounted for under the CSDRC will not count towards the VAT registration limit. This means that if a customer is not already required to be registered for VAT, the CSDRC “deemed self-supplies” will not change this.
Subcontractors will see a loss of cashflow under the scheme and its likely to cause issues for customers as they need their Making Tax Digital systems to be able to cope with the change.
Subcontractors also need to be sure that their services are within CSDRC before agreeing not to charge VAT.
CSDRC will follow the CIS rules to determine what is within the scope of CSDRC.
In the first 6 months HMRC has suggested they will apply a light touch to the new rules.
AdWords are invoiced from the Republic of Ireland and subject to ‘Reverse Charge‘ VAT.
When you buy services from suppliers in other countries, you may have to account for the VAT yourself – depending on the circumstances. This is called the ‘reverse charge’, and is also known as ‘tax shift’. Where it applies, you act as if you are both the supplier and the customer – you charge yourself the VAT and then, assuming that the service relates to VAT taxable supplies that you make, you also claim it back. So there’s no net cost to you – the two taxes cancel each other out. [HMRC]
If you can’t give Google a UK VAT registration number they will charge Irish VAT at 21%.
If you can supply a VAT registration number you won’t be charged Irish VAT and will be subject to ‘Reverse Charge’, this means you calculate the amount of VAT – Output Tax – on the full value of the services supplied to you, and then fill in the relevant boxes on your VAT Return as follows:
- put the amount of VAT you calculated in Box 1, and if you’re entitled to reclaim the VAT on your purchase of these supplies, also put the same figure in Box 4 (this in effect cancels out the figure in Box 1)
- put the full value of the supply in both Box 6 and Box 7
So all the figures net off to Zero!
If you make reverse charge sales – sales to which a reverse charge is applied – you must notify HMRC and send in regular Reverse Charge Sales Lists.
Linked In invoices are also subject to ‘Reverse Charge’ this is how you can give Linked In your VAT Registration:
If you purchase LinkedIn products for business purposes, you can provide your Value Added Tax # (for European Union or EU VAT customers) for proper tax handling. This information can be added for future orders (not past receipts) on the Payment section of your Privacy & Settings page.
To add your VAT number:
- Move your cursor over your profile photo in the top right of your homepage and click Privacy & Settings. For verification purposes, you may need to sign in again.
- Click Manage Billing Info.
- Click Edit next to the VAT # field.
- Enter the 2-character country code followed by your VAT#. For example, LinkedIn’s Irish VAT# is IE9740425P.
- Click Update.
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