VAT reverse charge for construction work

VAT reverse charge for construction work

A domestic reverse charge will be introduced from 1 October 2019 to tackle VAT fraud in the construction industry.

What is a reverse charge?

In a nutshell the reverse charge is where the customer charges themselves VAT, rather than the supplier charging VAT. This means there is no opportunity for the supplier to disappear without paying the VAT to HMRC.

When will this come into effect?

1 October 2019

Who will be affected?

Businesses involved in buying or selling specific construction services.

What types of construction services will be covered by the reverse charge?

It will apply to construction services that are currently covered by the Construction Industry Scheme, specifically Business to Business (B2B) supplies between VAT registered businesses where the recipient then makes an onward supply of the same construction services.

What supplies are excluded from the reverse charge?

It will not apply where:

  • Services are applied to the end user, such as the property owner, or directly to a main contractor who sells a newly completed building to the customer
  • The recipient makes onward supplies of those construction services to a connected company
  • The supplier and recipient are landlord and tenant or vice versa, or
  • The supplies are zero-rated.

The Government’s original proposal stated that the reverse charge would apply to ‘labour only’ supplies of construction services. However, HMRC’s latest publications state that it will also cover the provision of construction services that include materials. This will bring many more construction businesses into the reverse charge than first thought.

How will it work?

The introduction of a reverse charge will not change the liability of the supply of the specified services. It will just change the way in which the VAT on those supplies is accounted for- rather than the supplier charging and accounting for the VAT, the recipient of those supplies will account for the VAT. Only supplies made on, or after 1 October 2019 will apply. This will include goods supplied with those services.

How should contractors prepare for the change?

Businesses that supply construction services should identify instances where they supply services to other businesses in the construction sector (rather than to a consumer of those services) and determine whether the services are included within the list of specified service. Businesses that are caught by this will from October 2019 no longer need to charge VAT on these services as the recipient will charge themselves VAT.

How Hawsons can help

If you have any concerns relating to the introduction of the reverse charge or any other aspect of your VAT affairs, please get in touch with Tony Nickson or your usual Hawsons contact.

 

Tony Nickson is a VAT Consultant at the firm. He provides practical VAT advice to a wide range of clients in numerous business sectors and advises on matters relating to sole proprietors, partnerships and corporate bodies on all VAT issues including exporting, importing or providing goods/services within the UK. Please contact Tony on [email protected] or 0114 266 7141.

Free initial meeting

Transport and Logistics 2018 Budget review and analysis

Transport and Logistics 2018 Budget review and analysis

Transport and Logistics 2018 Budget review and analysis

Phillip Hammond delivered his Autumn Budget on the 29th  October 2018 which included a number of measures that affect the Transport & Logistics sector. In this article, we take an overview of some of these measures and apply them to areas of this sector.

Business Tax Measures:

  • There were no alterations announced relating to HMRC’s Making Tax Digital programme and businesses affected by this will need to make sure they can comply with the new rules from 1st April 2019. (For more details relating to Making Tax Digital, check out our Making Tax Digital Hub at https://www.hawsons.co.uk/making-tax-digital-hub/
  • An increase in the Annual Investment Allowance for two years starting on 1st January 2019 was announced. This is being increased from the current level of £200,000 per year to £1,000,000 per year. This is a welcome increase for the sector particularly where fleet or plant renewals are anticipated. On the flip side, the rate at which allowanced are quoted on Special Rate Pool plant and high emissions cars are to reduce from 8% per annum to 6% with effect from April 2019.
  • The current 100% First Year Allowance per expenditure on electrical charge point equipment will be extended until 2023.
  • Expenditure incurred on non-residential structures and buildings incurred after 29th October 2018 will qualify for allowances on 2% straight line basis.

Employment Tax Measures

  • Medium sized and large organisations will be subject to the changes in IR35 that came into effect in April 2017 for the public sector. Responsibility for operating the off-payroll rules will be transferred from the individual worker to the organisation, agency, or third party engaging the working. This comes in to effect from April 2020.
  • For the businesses with an employees’ NIC bill of more than £100,000 in the previous tax year, the Employment Allowance of £3,000 will be disappearing from April 2020.
  • Draft legislation has been issued which removes the need for employers to check receipts when making subsistence payments to employees using benchmark scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel. This will take effect from April 2019.

Capital Taxes

  • Changes to Entrepreneurs Relief- two new tests have been added to the definition of a personal company which requires the claimant to have a 5% interest in both the distributable profits and net asset of the company. This is in addition to the existing tests that already require a 5% interest in the ordinary share capital and 5% of the voting rights.
  • The qualifying period in which these conditions must be met is set to increase for disposals on or after 6th April 2019 from one year to two years. There will be an exception where a business ceased prior to 29th October 2018.

Other Announcements

Other measures announced relating to the transport and logistics sector were:

  • Fuel duty was frozen for a ninth consecutive year.
  • The fuel duty differential for alternative fuels to be maintained until 2032, subject to a review in 2024.
  • Announcement of a £28.8 billion National Roads Fund to improve Britain’s roads.
  • Vehicles Excise Duty for HGV’s to be frozen for 2019/20.
  • Small pockets of further funding available for the development of Northern Powerhouse Rail and East West Rail.

Away from the budget, the Office of Road and Rail have concluded that Network Rail will be able to spend £39.7 billion to operate, support, maintain and renew the nation’s railway over the five years from April 2019.

Paul Wormald, Partner at Hawsons, commented: “There were a number of positives coming out of the budget for the sector. The announcement of major spending programmes on road and rail infrastructure is welcomed, and the increase in the AIA, along with the maintenance of the fuel duty differential for alternative fuel is a neat link up that may encourage investment in haulage fleets in particular. On the downside the changed to Entrepreneurs Relief will mean that care is required in making sure that planned disposals of shareholdings meet the qualifying criteria and professional advice should be sought when planning a business sale.”

To read the full Autumn Budget 2018 summary click here.

Paul Wormald is a partner at Hawsons, working in the Doncaster office. He worked previously with two national firms of Chartered Accountants prior to joining Hawsons in 2001. For more information or advice on anything covered in this article, please contact Paul on [email protected] or 01302 367 262.[/author_info]

The Future of Audit?

The Future of Audit?

The Future of Audit?

It has been a difficult few months for the auditing industry – and in particular for the national firms that audit large listed companies and other ‘Public Interest Entities’.  After the high profile collapses of BHS and Carillion, amongst others – where the question of blame was put at the door of the auditors by the press – last week parliament’s Business, Energy and Industrial Strategy (BEIS) committee launched an inquiry into what it called the ‘broken audit market’.

The BEIS committee’s inquiry is the fourth ongoing review into the audit sector or its stakeholders along with the Competition and Market Authority’s review of the audit market, the independent review of the FRC (the auditors’ regulator) led by Sir John Kingman and Project Flora, a government-backed review into the future of the audit industry.

The outcome of these reviews is not yet known – but one thing that we can say with certainty is that the future audit market will look different to the one that exists today.

So, what does this all mean for firms like Hawsons?  The partners here see the potential future disruption as an opportunity.

Medium sized firms like ours are agile and have the ability to adapt quickly to the changing world around us.  Our partners have a wider skill set than that typically found in ‘Big Four’ partners, who tend to specialise in a service stream and have more time to spend with our clients, meaning that we can develop deeper working relationships.  David Grunberg, founding partner of Grunberg & Co, said in his recent article in Accountancy magazine ‘A commonly heard remark from clients who leave the Big Four is that they felt a stronger bond being created with the partner and the team they joined at the new firm’.

This wider skillset and closer relationships mean that we really understand our clients’ expectations and can adapt and innovate to meet those expectations.  Innovation has been important for us – evidenced by our partnerships with Xero and Quickbooks for online accounting and our ‘Making Tax Digital’ workshops – and will continue to be as the market and clients’ expectations change.  Innovation is also important in the world of audit – making sure that we combine tried and tested methods with new technology to deliver efficient yet robust and effective audits.

Clients also expect us to be able to offer international expertise.  Through our membership of HLB – the 12th largest global network of accounting firms – we have access to 25,000 professionals in over 150 countries.  In any country that our clients want to do business in, we can provide guidance and expertise through the network.  We currently do a great deal of work with the HLB network, so the service is seamless and the service level is similar to that offered by the Big Four networks.

The future of the audit market is unknown, but with our agility, close client relationships, ability to innovate and international network, Hawsons is well placed to be able to take advantage of any opportunities that arise.

Craig Burton

Partner, Hawsons

 

Free initial meeting

Hawsons will be Baking and Biking for Children In Need

Hawsons will be Baking and Biking for Children In Need

Hawsons Bake and Bike for Children in Need

Employees and Partners at all three offices of Hawsons will be swapping their suits in favour of more leisurely attire as they set out to do their thing to fundraise for BBC Children in Need’s 2018  Appeal.  Money raised will help to support disadvantaged children and young people all across the UK. 

Staff and partners will be aiming to raise funds for Children In Need in two ways this coming Friday.

Firstly via the now established ‘bake-off’ challenge where members of the firm pit their culinary skills against one another to see who can bake the tastiest cake. The cakes are up for sale to staff and visitors to each of the offices on Friday.

In addition and as an antidote to the calories consumed on the day each office is also undertaking an exercise bike challenge with staff in each office undertaking shifts on the bike to see how far each office can cycle over the course of four hours. Again visitors to our offices on Friday can contribute to the cause on the day. Speculation abounds as to which office will top the distance charts and have the fullest buckets come 5pm…..

Simon Bladen (Sheffield Partner) and Paul Wormald (Doncaster Partner) both agreed that some inter-office rivalry will not only be a great motivator, but should also help to hopefully raise more funds toward this fantastic cause.

Further information on BBC Children in Need can be found at bbc.co.uk/Pudsey

Survey reveals that GP partners earn less than locums

Survey reveals that GP partners earn less than locums

Most GP Partners earn less per clinical session than locums earn at their practices.

The results come from a recent survey undertaken by GPonline that showed one in seven partners earn less than non-partner doctors.

Thousands of partners across the UK now work in what are being referred to as ‘zombie practices’. The term ‘zombie practice’ derives from what is more commonly known as a ‘zombie company’ which is a company that is able to continue to stay open but without making any profits. The result of partners working for these ‘zombie practices’ is that there is a large amount of risk, responsibility which is not matched by the financial rewards.

The results of the poll showed that:

  • Out of the 400 partners, 52% said they earn less than locums at their practice
  • 15% earn less than salaried GPs at their practice
  • 82% would back the move of guaranteed minimum income for GP partners.

The idea that there should be a guaranteed minimum income for GP partners has been accepted by Scotland with the introduction of a minimum income per partner of just over £80,000, to be will be implemented in April 2019. However, there has been no discussion as to whether this is an option for England yet.

Two-thirds of partners have agreed that salaried and locum GP pay should be capped at an amount that is below that of any the partners’ income in the practice. However, this is not supported by the GPC chair, Dr Richard Vautrey, who said that: Doctors who want a guaranteed income figure should consider a salaried role. To have this guarantee is not what it means to be in a partnership. He said: “you need to recognise that it has a degree of responsibility and risk and there is a potential for variable payment, as with any other business.”

However, it does still need to be recognised that the income for partners recorded in 2016-17 was 22% lower than the income recorded ten years previously in 2005-6.

Dr Nigel Watson, a senior GP said earlier this year that the risks of partnerships currently outweigh the reward. This has impacted the number of people choosing to go into partnerships with the number of partners dropping 10% since September 2015.

 

More from our GP practice experts

You can find all of our latest GP practice sector news and newsletters here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.