Some of my clients who are subcontractors have sent their invoice. They charged VAT on materials but not on the services because these are covered by the domestic reverse charge (DRC).
Is the VAT charge on materials correct ?
Materials are Generally Subject to the DRC: When a supply of construction services is subject to the DRC, the VAT is not charged by the supplier. Instead, the customer accounts for both input and output VAT on their VAT return.
1.Supplies to End Users: If the customer receiving the construction service is the end user (i.e., they do not intend to sell or supply the service onward), then the DRC does not apply. Instead, regular VAT rules apply, meaning the supplier charges VAT on the full value of the work, including materials.
2. Intermediary Suppliers: If the customer is an intermediary, not supplying the construction services directly but passing them to another party, they are also outside the scope of the DRC. VAT is charged in the usual way.
In summary, under the CIS, materials are excluded from deduction calculations, while under the DRC, materials are generally included unless the customer is an end user or intermediary supplier.
