Reverse VAT Explained 

  • By Jacob Orphanou
  • •
  • 24 Mar, 2023
  • •

Previously, anyone that was VAT registered who supplied construction work in the UK would have invoiced money due to them, including a charge for VAT.

For instance, every £1,000, a VAT registered business currently invoices £1,200. Every three months the business then deducts any VAT incurred from expenses from the £200 and pays the remainder to HMRC or receive a VAT rebate should the VAT on expenses be higher than the VAT on income.

March 2021, things changed. Now the only companies in the construction chain that bill VAT will be those that are contracted with the customer.

All subcontractors to a main contractor will treat the VAT as if it has been accounted for and will not charge any further VAT on their income. However, each quarter they will still be able to claim the VAT on their expenditure.

The below diagram will hopefully give you a clearer understanding to the explanation above.

 

However, this does not mean that all your work will no longer be inclusive of VAT.  As shown above, jobs where you are the main contractor, you will still have to include a VAT charge as normal. There are also a few exceptions to the above diagram. Below is a list taken from the government website outlining when you should and should not use the reverse charge.

 

 

When you must use the VAT reverse charge

The list of services in this guide is the same as the list of ‘construction operations’ covered by the Construction Industry Scheme, except for supplies of workers provided by employment businesses.

You must use the charge for the following services:

·      constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services

·      constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence.

·      installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure

·      internal cleaning of buildings and structures, so far as carried out during their construction, alteration, repair, extension or restoration.

·      painting or decorating the inside or the external surfaces of any building or structure

·      services which form an integral part of or are part of the preparation or completion of the services, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works.


When you must not use the VAT reverse charge

Do not use the charge for the following services, when supplied on their own:

·      drilling for, or extracting, oil or natural gas

·      extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose

·      manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site.

·      manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site.

·      the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants

·      making, installing and repairing art works such as sculptures, murals and other items that are purely artistic.

·      signwriting and erecting, installing and repairing signboards and advertisements.

·      installing seating, blinds, and shutters

·      installing security systems, including burglar alarms, closed circuit television and public address systems

Should you have any questions regarding the above, please contact one of our team on 01438 313111 or send an email to us through Admin@toas.co.uk and one of our experienced members of staff will be sure to get back to you. 

Delays in 2021 Tax Rebates

By Jacob L Orphanou • 20 May, 2021

Since the end of the 2020/2021 tax year, we have noticed a number of clients are experiencing delays in receiving their rebates. After contacting Her Majesty Revenue And Customs (HMRC) through their agent helpline and speaking to multiple different people, we have been advised the delays are due to HMRC having to check for any SEISS grants claimed and make sure they have been included in the tax return.

We understand that HMRC will have a new programme up and running by the 19th June 2021 and have also been advised that all rebates currently waiting to be processed should be released on or before the 5th July 2021.

We can only apologise for the delay and can assure you that every measure has been taken to get your rebate to you as quickly as possible. This last year has been very alien to everyone, HMRC are no different. I am sure this is just teething problems and once the proposed new system is up and running things should hopefully begin to run a lot more smoothly.

Any questions, please don’t hesitate to call on 01438 313111 or email me directly Jacob@toas.co.uk.

Government Grant For The Self Employed Amid Covid-19 Epidemic

By Jacob Orphanou • 27 Mar, 2020

The grant explained

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.

 

HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.

 

Can I claim?

 From what we know right now, in order to be eligible you must meet the following criteria.

Be self-employed or a member of partnership.

Have lost trading/partnership trading profits due to COVID-19.

Have a tax return filed for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks from this announcement to do so.

Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021

Have trading profits of less than £50,000 and more than half of your total income come from self-employment. This can be with reference to at least one of the following conditions:

Your trading profits and total income in 2018/19

Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

 

 

How and when can i claim? 

Do NOT contact HMRC. HMRC will use existing information to check potential eligibility and invite applications once the scheme is in place. HMRC will then pay the grant directly to eligible claimants’ bank account. HMRC is urgently working to deliver the scheme; grants are expected to start to be paid by the beginning of June 2020. This time is needed to ensure that the scheme is both deliverable and fair.

Companies to receive three-month extension to file accounts 

By Tony Orphanou • 25 Mar, 2020

Businesses have been given an additional three months to file accounts with Companies House  during the current Covid-19 pandemic, the Department for Business, Energy and Industrial Strategy has confirmed.

 

From today (25 March), all businesses will be able to apply for the three-month extension following a joint initiative between the government and Companies House.

 

The government stated that the move will allow businesses to prioritise their management of the impact of coronavirus without receiving penalties.

 

Following the agreement, companies will still have to apply for the three-month extension to be granted, but those citing issues regarding Covid-19 will be “automatically and immediately granted an extension”.

 

All applications can be made through a fast-tracked online system by using the following link.

https://beta.companieshouse.gov.uk/extensions?_ga=2.150179638.1289762745.1585144155-124908634.157797...

How To Contact Us During This Difficult Time

By Jacob Orphanou • 24 Mar, 2020

 We hope that everyone is safe and sound.

I want to just say that Tony Orphanou & Associates is still open for business.

For CIS queries please email cis@toas.co.uk any other self-assessment queries please use Selfassessment @toas.co.uk

For general business queries please use enquiries@toas.co.uk as normal. 

We will endeavour to respond to your email with 48 hours but please bear with us as some queries may take longer to respond due to the reduced staff.

Thank you for your patience during these difficult times.

VAT Payments Deferred For Three Months

By Jacob Orphanou • 24 Mar, 2020

The VAT deferral will apply from 20 March 2020 until 30 June 2020.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period.

Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.

VAT refunds and reclaims will be paid by the government as normal. Although with everything currently going on, we're advising clients that repayments MAY take longer then usual to be released. 

We at Tony Orphanou & Associates are working to keep everyone as well informed as possible during these difficult times.  

Covid-19 Update

By Jacob Orphanou • 23 Mar, 2020


As you are aware Tony Orphanou & Associates have always looked after you.

 

Under the current circumstances we have a duty of care to both yourself and our employees.

 

Therefore, with immediate effect we will be implementing the following:=

 

  1. There will be NO FACE to FACE Meetings. Instead we will converse with you via phone, email & Skype.
  2. Some members of staff may take to working remotely
  3. Paperwork can be dropped off, but we ask that you pre-arrange this with us.
  4. Where available possibly send in CLEAR DIGITAL Copies of invoices / Receipts / Bank Statements PLEASE KEEP COPIES in case any further information is required.
  5. If ANYONE has had or been in contact with ANY of the symptoms, THEN PLEASE DO NOT drop off any paperwork until the 14-day period has passed
  6. If you are struggling to meet any of the deadlines with HMRC and Companies House then please let us know then we can try and make arrangements.

 

We will continue to complete accounts, VAT, payroll & tax returns during this period.

 

As you can appreciate these are very difficult times and we are trying our best to ensure that we can continue our support to you and your business.

 

You can find government advice by following this link: https://www.gov.uk/government/topical-events/coronavirus-covid-19-uk-government-response

 

If you have any questions, please do not hesitate to contact us. After all, our business depends on your business. Let us work together over the next couple of months.



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