How does the reverse charge basis work in the building industry ?
1. The subbie issues an invoice to the principal
contractor, which shows all the same information as appears on a VAT
invoice, except the VAT rate and VAT amount. The invoice should include the
VAT registration number of the sub-contractor.
2 The invoice should also contain the statement ‘VAT on this supply to be
accounted for by the principal contractor’.
3 The principal contractor pays the subbie for the services. This
payment should not include VAT.
4 If RCT is to be deducted by the principal contractor, it should be calculated on
the VAT-exclusive amount.
5 The principal contractor should include the VAT on the services received from
the sub-contractor in Box T1 of its VAT return for the period in which the
supply is made.
6 Where entitled to do so, the principal contractor can claim a simultaneous
input credit in its VAT return for the period.
7 The subbie does not pay any VAT on the payments from the principal contractor so it goes in at 0%.
Note that if you work with private persons or business not in the building industry then you charge the normal vat rate of 13.5%
Any queries on the above give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie