Reverse charge

J

Josvill2010

Registered User
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Do you know about the Reverse charge and if Revenue is applying the rule to Subcontractors costs. It would appear that any subcontractor should bill the principal without VAT. Then, the principal is subject to account for both a VAT payable and VAT chargeable amount

Regards,
j
 
The rules on the reverse charge as it applies to construction are all available on Revenue's website.

www.revenue.ie/en/tax/vat/property/reverse-charge.pdf

The subcontractor charges net, i.e. without VAT. The principal contractor owes the VAT to Revenue on the reverse charge mechanism but gets a simultaneous credit for the VAT as an input item. Effectively, no net payment arises.

Any costs of the subcontractor on which the subcontractor is entitled to claim VAT, is claimed by the subcontractor in the normal manner. Effectively, if a subcontractor is doing all their work for principal contractors and the subcontractor has VATable costs then the subcontractor will be in a VAT repayment situation.
 
Its a total pain..... why could'nt they just have left it as it was, charge Vat and reclaim vat as with every other transaction.
 
NHG said:
Its a total pain..... why could'nt they just have left it as it was, charge Vat and reclaim vat as with every other transaction.
Click to expand...

It is a pain for the principal mainly. It also creates an interesting situation though. Some small subcontractors were possibly getting in arrears with taxes, ok that would have ultimately meant withdrawal of C2s and going on RCTDC's . However by changing the VAT system, it reduces the subcontractors liabilities and for some puts them in in situation of seeking refunds from Revenue ratehr than paying. It may have had the effect of positive short term cash flows for Revenue.
 
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