CIS Reverse Charge - Common questions

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Legislation

Do we have to register for CIS Reverse charge VAT?

What happens if the subcontractor is not VAT registered?

What happens if the contractor is not VAT registered?

Are there any minimum thresholds before we have to comply?

When do the CIS Reverse VAT charge obligations start?

What about projects that cross over the 1st March 2021?

What is the 5 disregard?

Considerations

Accountability - If a subcontractor fails to state 'reverse charge' and invoices as normal is it the main contractors responsibility to notify the subcontractor?

Cashflow - As an electrical sub-contractor we charge and collect VAT and pay it to HMRC quarterly. Surely the reverse charge will affect my cashflow?

Could reverse charge cause a credit balance on the VAT Return for materials. Invoices from our suppliers will charge VAT but this will then not be passed on with the sales invoice to the main contractor

How will the rules differ if the contractor-subcontractor arrangement is across different countries or Ireland?

Processing

How will this work in Sage 50 Accounts including what tax codes to use?

Do I need the CIS module in Sage 50 Accounts for Domestic Reverse Charge?

How will this work in Sage 200 including what tax codes to use?

Will CIS deductions still be made on invoices raised?

How do you determine which supplies come under the scheme?

Do you have to state how much VAT the main contractor has to pay to HMRC or can you just note that any VAT applicable must be paid to HMRC?

What about zero rated VAT on new builds?

If I go to a wholesaler to buy an item, that is needed for a project, will they need our VAT number or will they just not charge VAT and note reverse charge applies. Will it be up to me to tell them?

CIS Reverse Charge messages don't appear on standard layouts

How do I post subcontractor CIS transactions?

Letters

Are there any letters available to send to contractors and sub-contractors?

Supply chain

Supply Chain - We operate as both main contractor and subcontractor will this create any additional problems?

If we work for both a main contractor but also direct to client would we produce both reverse charge invoices and invoices as we do currently?

The NHS is normally deemed to be a Contractor for CIS taxation so does it pay the reverse charge?

Subcontractors

Gross payment status - The main contractor doesn't usually deduct CIS from us as we are paid gross, will this change?

Does the reverse charge apply to supply of goods only?

We are a subcontractor and as part of the reverse charge we will have no output vat. We will have input vat, so how will this work with our VAT Return as we won't have any output VAT to offset our input VAT against?

Materials / Goods

I invoice my main contractor a lump sum for labour and materials - the labour I use is subcontracted and I buy the materials - how does the materials VAT work out?

As a contractor, should our materials suppliers still charge VAT to us with the reverse charge?

VAT submission

Will we be able to change VAT periods from every three months to monthly, improving cash flow after reverse VAT?

Is all reverse charge VAT paid over when your VAT is usually due?

Will the main contractor pay over the VAT at point of deduction monthly like CIS or quarterly like currently carried out?

Exemptions

I was told professionals, for example architects, are outside the reverse charge scope?

Client

How does reverse charge work when we, as a subcontractor are working as a main contractor? For example if we are completing a project directly for a member of the public.

As a subcontractor is it our responsibility to decide if the customer is the end user?

So if our clients are all end users, then we will invoice with VAT as normal and receive VAT to pay over to HMRC?

VAT schemes

We are partially exempt for VAT purposes. We build houses so we receive service invoices from CIS Suppliers. Would we have to implement this legislation also?

Flat Rate VAT - We are on the flat rate VAT scheme, how will this impact us?

What about those suppliers on cash accounting. So we will be receiving invoices differently depending upon which VAT scheme our subcontractors are on?

Application for payment

Application For Payment - When a payment is paid on an application, will the contractor have to put the reverse charge on the payment?

Retentions

Retention Payments - How is retention treated when a contract has finished prior to 1st March 2021, but the defects period ends after March 2021 and therefore payment is received after?