The reverse charge is a way of accounting for VAT where the end-customer accounts for VAT and the supplier of construction services does not. The reverse charge means the customer receiving construction services must pay the VAT to HMRC instead of the supplier. The end-customer recovers VAT subject to the normal rules set by HMRC.<\/strong><\/p>\n\n\n\n Employment businesses are treated differently for the purpose of the reverse charge. Supplies by employment businesses are not subject to the reverse charge, even if those supplies are within the scope of CIS.<\/p>\n\n\n\n Employment businesses supplying construction workers are, for VAT purposes, treated as supplying staff rather than building and construction services.<\/p>\n\n\n\n For VAT purposes, such activities of workers are supplies of staff by their employer and not supplies by the workers themselves. The supplier makes a supply of staff for VAT purposes if it provides another person with the use of an individual who is:<\/p>\n\n\n\n A similar situation arises with joint ventures, the construction firms that are parties to the joint venture provide workers on secondment to work on the joint venture project. Payments by the joint venture to each construction firm for their staff is not payment for construction services and therefore not subject to the reverse charge.<\/p>\n\n\n\n The reverse charge applies to services provided by labour only sub-contractors. The labour only sub-contractor is responsible for the works carried out and therefore subject to the reverse charge. This applies if the services provided are:<\/p>\n\n\n\n A supply of labour only construction services is subject to the reverse charge whereas a supply of staff is not. The simplest way to tell the difference for a supply of:<\/p>\n\n\n\n Supplies by labour-only sub-contractors are subject to the reverse charge if the supplies are within the scope of the Construction Industry Scheme and all the other conditions are met.<\/p>\n\n\n\n The supplies made by the employment business are not subject to the reverse charge even if those supplies are within the scope of the Construction Industry Scheme.<\/p>\n\n\n\n The supplying business should be treated as an employment business if these features apply:<\/p>\n\n\n\n The supplying business should be treated as a labour only sub-contractor if these features apply the:<\/p>\n\n\n\n The reverse charge applies to the services supplied by the business (if those services are within the scope of CIS) and VAT should not be charged on the invoices.<\/p>\n\n\n\n Do not use the charge for the following services, when supplied on their own: <\/p>\n\n\n\nEmployment Businesses Supplying Construction Workers<\/h2>\n\n\n\n
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Labour Only Sub-Contractors<\/h2>\n\n\n\n
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Distinction Between Employment Businesses and Labour-Only Sub-Contractors<\/h2>\n\n\n\n
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When You Must Not Use the Reverse Charge<\/h2>\n\n\n\n