View the related Tax Guidance about Reverse charge
Reverse charge ― buying in services from outside the UK
Reverse charge ― buying in services from outside the UKThis guidance note covers the reverse charge that applies to services that have been bought in from outside the UK. For an overview of VAT and international services more broadly, see the International services ― overview guidance note. For in-depth commentary on the legislation and case law in relation to the reverse charge, see De Voil Indirect Tax Service V3.231.Reverse charge ― the basicsCertain services are subject to a reverse charge when they are bought in from outside the UK. This means that instead of the supplier being required to register and account for VAT on its supply of services as normal, the obligation to account for VAT on the services is actually shifted to the customer. The customer therefore treats the service as if it were supplied both to and by itself. In other words, the customer must ‘self-account’ for the VAT on its purchase. The customer is still able to recover the VAT that it charges to itself under the reverse charge subject to the normal VAT rules for input tax recovery. This means that if the customer is entitled to recover all of its VAT, the reverse charge ends up being a simple administrative entry on its VAT return. However, if the customer is not entitled to recover all of its VAT (for example because it is partly exempt), then the reverse charge will have the effect of increasing the amount of VAT due to HMRC. The
Domestic reverse charge ― overview
Domestic reverse charge ― overviewThis note provides an overview of the domestic reverse charge provisions that have been introduced in order to tackle VAT avoidance in certain perceived ‘high risk’ industries in the UK.What is the domestic reverse charge?The domestic reverse charge is an anti-fraud measure that is designed to limit the opportunity for suppliers to charge VAT on supplies made and then fraudulently fail to remit this VAT to HMRC. The domestic reverse charge is only applied to specified supplies of goods and services that HMRC considers more likely to be subject to fraudulent activities. The domestic reverse charge is not the same as the cross-border reverse charge that applies to services received from overseas vendors ― see the Reverse charge ― buying in services from outside the UK guidance note for more information. Businesses that make supplies covered by the domestic reverse charge must not charge VAT on the supply made. The customer is required to self-account for any VAT due on the VAT return covering the period in which the supply was made. What are the specified goods and services covered by the domestic reverse charge?The following supplies come within the scope of the domestic reverse charge:Specified goods / servicesImplementation dateRelevant guidance noteMobile phones and computer chips1 June 2007Domestic reverse charge ― mobile phones and computer chipsCarbon emissions allowances1 November 2010Domestic reverse charge ― trading in carbon emissionsWholesale gas and electricity1 July 2014Domestic reverse charge ― wholesale
VAT review ― registration and compliance
VAT review ― registration and complianceThis guidance note is intended to provide more detail on areas to consider during a VAT review which relate to general compliance. This document should be used in conjunction with the Checklist ― VAT review when undertaking the actual review in order to ensure that all relevant items have been covered.Whilst this guidance and associated checklist have been prepared to seek to cover the common issues and risks which might arise, care should be taken to ensure that any specific business or sector issues are considered as part of a comprehensive review.VAT returns and compliance ― return and payment deadlinesA typical starting point when undertaking a VAT review or due diligence exercise is to confirm whether all VAT returns and payments have been made on time. The VAT return and any payment due must reach HMRC by the due date stated on the return. For a normal return, this will be:•no later than one month after the end of the VAT return period, and•no later than one month after the effective date for cancellation of registration (or, in the case of a business that had failed to register, one month after the date when liability to be registered ceases)Businesses can check the payment deadline using the payment deadline calculator provided by HMRC.If during the course of a VAT review it is identified that returns or payments have been made late, the next step will be to confirm whether the business has
Flat rate scheme (FRS) — operating the scheme
Flat rate scheme (FRS) - operating the schemeThis guidance note sets out how to operate the flat rate scheme (FRS). For an overview of the FRS more broadly, see the Flat rate scheme (FRS) - overview guidance note.See also De Voil Indirect Tax Service V2.199B and V2.199C.Operating the FRS - the basicsA business operating the flat rate scheme (FRS) must choose, from a prescribed list of sectors, the sector which most closely describes its type of business. A set ‘flat rate percentage’ is applicable to each sector.In simple terms, this flat rate percentage is applied to the VAT inclusive turnover of the business to calculate VAT due to HMRC for a period. This means that the business is not required to keep detailed input tax records to work out exactly how much VAT can be reclaimed on costs. Instead, a notional amount of VAT recovery is built into the flat rate percentage.For example, an accountant operating the FRS is likely to choose ‘accountancy or book-keeping’ as its type of business. The applicable flat rate percentage is 14.5%. If the accountant has a VAT inclusive turnover of £120,000, VAT due will be £17,400 (£120,000 x 14.5%).Various factors can complicate the basic operation of the FRS. For example, when choosing an appropriate sector there may be multiple possibilities or a business may have more than one kind of business activity. There are also special ‘limited cost trader’ rules which mean that businesses with low levels of costs must use a higher
Imports ― special rules for consignments of £135 or less
Imports ― special rules for consignments of £135 or lessThis guidance note looks at the special rules that apply to imports of consignments valued at £135 or less which are located outside the UK at the point of sale.For importing goods from outside the UK generally, see the Imports ― overview (rules from 1 January 2021) guidance note. For movements of goods and Northern Ireland, see the Northern Ireland ― overview guidance note.In-depth commentary on the legislation and case law can be found in De Voil Indirect Tax Service V3.305.Imports of goods sold directly to GB customersWhere a consignment of £135 or less is sold directly to a customer in Great Britain and the goods are located outside the UK at the point of sale the place of supply for VAT purposes is deemed to be the UK. The effect of this is that overseas seller must normally register for UK VAT and account for VAT at the point of sale. However, where the supply is business to business and the customer has a valid UK VAT registration number, then a ‘reverse charge’ applies. This means that the overseas seller is not required to account for the UK VAT and instead the customer ‘self-accounts’ for the VAT due. The customer effectively treats the goods as supplied both to and by itself. This is a very similar mechanism to the reverse charge which applies to services bought in from overseas, for which see the Reverse charge ― buying in services
Land and buildings ― building work ― extensions, improvements, maintenance and repairs
Land and buildings ― building work ― extensions, improvements, maintenance and repairsThis guidance note provides information on the VAT treatment of extending, improving, maintaining and repairing buildings located in the UK.For further commentary on the legislation and case law please refer to De Voil Indirect Tax Service V4.407, V4.408 and V4.413.Work on buildings located outside the UK is outside the scope of UK VAT but may be subject to VAT or a similar tax in another country. For information on VAT in the EU please refer to the VAT in the EU guidance note. For information on VAT outside the EU please refer to the VAT outside the EU guidance note. The general distinction between work carried out in relation to an existing building and work constructing a new buildingWork carried out to extend, improve, maintain or repair an existing building:•may be carried out on a standalone basis in relation an existing building•may be carried out in the course of converting an existing building•is, subject to the exception explained below, distinct from work carried out in the course of constructing a new buildingThe general rule is that work carried out to extend, improve, maintain or repair a building of any description is distinct from work carried out in the course of constructing new buildings. The exception to this general rule is that an existing building of any description may be enlarged or extended in the course of constructing a new dwelling or dwellings. For example, an
Place of supply of services ― intermediaries
Place of supply of services ― intermediariesThis guidance note looks at the special place of supply rules that apply to intermediary services.For an overview of VAT and international services more broadly, see the International services ― overview guidance note. For information on agency and its VAT implications more broadly, see the Supply and consideration ― agents, agency and principals guidance note.In-depth commentary on the legislation and case law that applies to intermediaries for the purposes of the place of supply of services can be found in De Voil Indirect Tax Service V3.195. What is the place of supply of intermediary services?The place of supply of intermediary services will depend on whether the intermediary service is supplied business to business (B2B) or business to consumer (B2C).B2B intermediary services fall under the general rule for the place of supply of services and are therefore supplied where the customer belongs. However, B2C supplies of intermediary services are covered by a special place of supply rule. These are taxed in the same place as the supply to which the intermediary service relates (ie the underlying arranged supply). For discussion of whether a supply is B2B or B2C and for the general rule, see the Place of supply of services ― the general rule, relevant business persons and belonging guidance note.What are intermediary services?Intermediary services in the context of the place of supply of services rules are characterised by making arrangements for a supply by or to another person.
VAT on property acquisitions
VAT on property acquisitionsThis guidance note provides an overview of the VAT implications of acquiring land and buildings located in the UK and outside the UK.Property may be acquired by:•buying it•constructing a new building•creating a building by converting an existing building•extending an existing building•renovating an existing buildingOne method of acquiring property is to buy exactly what is required. Other methods may include a combination the above. For example, a person may buy land and arrange for a new building to be constructed on it, or buy an existing non-residential building and arrange for it to be converted into a dwelling.This guidance note summarises the VAT issues on acquiring property. For a similar summary of the VAT issues on disposing of a property, see the VAT on property disposals guidance note.VAT implications of acquiring land and buildings located in the UKAs indicated above, there are various methods of acquiring land and buildings. In broad terms the methods are:•buying a property •arranging for building work to be carried out•a combination of the aboveThese methods of acquisition are discussed below.Buying a propertyThe table below provides a general overview of the VAT implications of buying property located in the UK and includes links to guidance notes which provide more information.Type of acquisitionDescriptionFurther readingBuying a dwellingA building may look like a dwelling and function as a dwelling and yet not qualify as a dwelling for VAT purposes.
VAT review ― purchases
VAT review ― purchasesThis guidance note is intended to provide an overview of the areas that should typically be considered as part of a VAT review when analysing the input tax recovery position of a business. This document should be used in conjunction with the VAT review checklist Checklist ― VAT review when undertaking a review to seek to ensure all the relevant items have been covered.While this guidance and associated checklist have been prepared to seek to cover the common issues and risks which might arise, care should be taken to ensure that any specific business or sector issues are considered as part of a comprehensive review.Private and non-business useVAT cannot be reclaimed on items that are purchased for a private or non-business purpose. Therefore, during the course of a VAT review, the focus should be two-fold; identifying whether any VAT has been over-recovered to date, and ensuring there are sufficient processes and controls in place to capture any private / non-business usage which might arise. Typical examples of the types of expenditure that could be for private / non-business purposes are (this list is not exhaustive):•domestic accommodation, household bills, groceries, domestic utilities, domestic telephone bills•clothing•private travel / fuel costs•hobbies, sport and other leisure activities•meals and drinks•accounting and taxation advice that does not relate to the businessIf any of the expenditure is used for both business and private / non-business purposes then the business may be able to reclaim VAT on
VAT registration ― voluntary
VAT registration ― voluntaryThis guidance note provides the following information regarding VAT registration on a voluntary basis:•when it is possible•reasons why it may be appropriate•practical points to considerFor in-depth commentary on the legislation and case law concerning voluntary VAT registration, please refer to De Voil Indirect Tax Service V2.144–V2.146.For guidance about the process of registering for VAT, please refer to the VAT registration procedure guidance note.The Input tax ― overview guidance note includes guidance on the rules for claiming VAT on costs incurred prior to the date of VAT registration.The Flowchart ― VAT registration ― compulsory or voluntary is intended to provide an overview of when UK VAT registration may be required on a compulsory basis or may be available on a voluntary basis. The flowchart does not, however, reflect all of the points covered in this guidance note and the VAT registration ― compulsory guidance note and it should be used in conjunction with both of these guidance notes.When can a person register for VAT voluntarily?The VAT registration ― compulsory guidance note explains when VAT registration is required on a compulsory basis. If VAT registration is not required on a compulsory basis, it is available on a voluntary basis if a person makes, or intends to may, any supplies that provide the person with an entitlement to claim VAT as input tax. For guidance on claiming VAT as input tax, please refer to the Input tax ― overview guidance note.The following categories of supplies provide
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