The VAT rates and thresholds applicable in the UK haven’t been altered for some years, but when the underlying rules change for certain goods and services, this can mean that VAT must be applied at a different rate, or that the method of accounting for VAT changes.
Construction industry reverse charge
The introduction of the domestic reverse charge for the CIS registered businesses on 1 October 2019 is the biggest change in VAT for some years. We outlined the changes in our newsletter on 13 June 2019, and the action to take for builder clients in our newsletter on 25 July 2019.
If you are one of subcontractor builder clients who is affected by the reverse charge, and most will be, it may be sensible for you to leave the VAT flat rate scheme on 30 September. It is possible to leave the flat rate scheme in the middle of a VAT quarter, but it is easier from an accounting point of view if the change is made at the end of a VAT quarter.
Energy saving materials
Some firms in the construction industry will be affected by a second alteration in VAT law on 1 October 2019; a change in the rate charged on the installation of solar panels and other energy saving items such as domestic wind or water turbines.
The installation cost is currently subject to 5% VAT, but this is increased to the standard rate of 20% for all turbines.
Installation of solar panels can continue to be charged at 5% VAT where the building is social housing, or the building occupant meets certain conditions. Solar panel installers need to research the detailed rules for installations undertaken from October onwards.
Supplies of education are usually exempt from VAT, but where a charge is made the education provider must be an eligible body for the services to be exempt from VAT. The definition of eligible bodies has been revised from 1 August 2019 (see section 4.1 of VAT notice 701/30). If you are involved in the education sector refresh your understanding of VAT notice 701/30.
If you sell electronic services such as ebooks to customers in other EU countries, and they are not within the de-minimis exemption (£8,188) for VAT MOSS, they need to account for VAT at the rate due where the customer is based. The rate of VAT due on digital publications has been reduced in many EU countries this year, from varying dates depending on the country.
When the UK leaves the EU the de-minimis VAT MOSS turnover exemption will immediately fall away as the UK will be a non-EU country.
Written by the Tax Advice Network