Two major changes for Construction companies – designed to tackle VAT fraud and abuse of the CIS scheme rules – have now come into effect.
Effective from 1 March 2021, the new VAT domestic reverse charge for building and construction changes the way VAT is accounted for in some scenarios. The rule changes affect most supplies of building and construction services where both supplier and customer are registered for VAT in the UK, and the supplies are reported within CIS.
You will find more information about the changes to VAT here
The start of the new tax year on 6 April also brought changes to the CIS rules designed to ‘level the playing field for all within the construction sector’. The changes give added bite to HMRC powers.
More power to HMRC
HMRC will be allowed, for example, to amend the CIS deduction amounts claimed by sub-contractor companies on their Real Time Information Employer Payment Summary returns, in cases where employers don’t provide evidence of eligibility and otherwise fail to cooperate with HMRC.
In addition, HMRC’s penalty powers will be enhanced where false information is given when applying for gross payment status or payment under deduction within the CIS. This could happen, for example, if someone exerts influence or control over a false registration.
Finally, there is clarification on how a contractor should account for the cost of materials when operating the CIS on a payment to a sub-contractor. The cost is only deductible where directly incurred by sub-contractors to fulfil their own contract with their contractor.