Author Archives: Cetin Suleyman - Partner

About Cetin Suleyman - Partner

T +44 (0)20 7874 8833

Cetin’s focus in on helping his clients improve their businesses and the decisions they make.

With an entrepreneurial family background and a first-hand understanding of what the "bottom line" means in a family business, Cetin brings this understanding into every task. As a result clients value his commercial and practical solutions, both for long and short term business and tax planning.

Most of Cetin’s clients are owner managers of small and medium sized businesses facing similar issues and the past 15 years have focused on the construction and property sector, although he still retains a strong interest in other industry sectors.

Finance teams should look to this period to get to grips with the likely costs and ensure that there is a joined up approach with buying/promoter teams because there could be a significant shift away from traditional site valuation models

What do the finance teams at housebuilders and developers need to know about the Bio-diversity Net Gain requirements?

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 5th October 2023

Categories:

Property & Construction

Field with yellow, purple and white flowers: black mustard (Brassica nigra) mixed with mayweed (Tripleurospermum maritimum) and hairy vetch (Vicia villosa). In the background a building and cars.

The Bio-diversity Net Gain (BNG) requirement means that any habitat lost by a development must be replaced with enhanced habitat such that the improvement in habitat scores at least 110% of the value of the habitat that is being lost.

When does this apply?

The new Bio-diversity Net Gain requirements had been expected to become mandatory this November for planning applications for larger sites in England. However, an announcement at the end of September has deferred the implementation to 2024, meaning it could coincide with the original deadline for smaller sites.

Will it still go ahead?

A spokesperson for the government confirmed that it is fully committed to biodiversity net gain which will have benefits for people and nature. We will set out more details on implementation timings shortly. They added that more than £15m has already been committed to help local councils recruit the specialists they will need to deliver the new rules.

How will it be calculated?

In short, it’s not straightforward. Biodiversity Metric 4.0 is a biodiversity accounting tool that can be used for the purposes of calculating biodiversity net gain and assess the value of a project. However the guidance notes (published on Natural England’s Access to Evidence website) run to nearly 70 pages indicating that developers should build in time to familiarise their teams and properly appraise sites under the forthcoming rules.

There is some support for smaller sites, with the introduction of a simplified calculation called the “Small Sites Metric”. Small sites are considered to be those less than one hectare and fewer than 10 houses, or smaller than half a hectare if the number of units is yet to be determined. The Small Sites Metric guidance notes run to 55 pages.

Given the level of understanding that developers and land buyers have to learn in order to be able to properly appraise development costs and the appropriate purchase price for sites, we do hope that the delay will be used to bring in greater clarity. Particularly as The House Builders’ Federation had previously criticised the guidance for containing ‘significant gaps’.

Costs

Unless the additional costs are factored into the residual value of site acquisitions, it is likely that costs will fall to the developer. This is particularly the case for land that has already been acquired in whole or which is under option. Hence, there is some urgency by which developers need to ensure that those costs are factored into their financial modelling.

In short, the biodiversity condition of each site will have to appraised as a starting point. The developer then needs to assess how the biodiversity lost is returned. This can take one of three forms, depending upon the specific details – replacement of habitat elsewhere on site, replacement off-site and acquisition of BNG credits.

Whilst the deliberately inflated costs of BNG credits are unlikely to be reality for most sites, there will still be costs for on-site and off-site locations to reach the 110% requirement.

Longer term implications

The BNG and maintenance would have potentially long term implications if there is a requirement for ongoing intervention to maintain their condition. This could have further valuation and accounting implications, including the need to introduce provisions that cover periods long after sales have completed. Not only can this affect the availability of future capital, but extends to changes in estate management services and the costs associated with that.

Value of land

As mentioned above, increased BNG costs for certain classifications of land, could mean that developers see the value of land banks and sites for purchase, shift in value.

For those sites where there is not enough on-site space to meet the requirements, developers will need to secure land off-site. However, Natural England’s Biodiversity Gain Site Register is not yet open and it will take time before there is a balanced supply to demand. This naturally plays into the hands of free market economics and could see short term spikes that create unfeasible situations for some.

And of course, the opposite is also true. For landowners including developers with landbanks of attractive land, this of course represents opportunity.

In summary

There is a bit of respite, but there will be additional costs and complexity for housebuilders to absorb into their business model. Finance teams should look to this period to get to grips with the likely costs and ensure that there is a joined up approach with buying / promoter teams because there could be a significant shift away from traditional site valuation models.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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The property sector is facing many challenging pressures including supply chain issues and rising fuel costs. However, there will also be the impact of taxation to factor in...

How tax planning for property developers choice of year-end can affect the amount of tax due.

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 12th July 2022

Categories:

The property sector is facing many challenging pressures including supply chain issues and rising fuel costs. However, there will also be the impact of taxation to factor in. The change in government has added new uncertainties so it is important to make sure to stay alert to the tax issues.

Tax on SPVs (Single/special Purpose Vehicles)

Many property investors choose to use SPVs, where each company holds one (or a small number) of properties, rather than put all of their assets into one company. This allows access to using different funders for different deals while containing the risk on one investment to that one company. It also keeps open the option of share purchases or share sales. Profits tend to be relatively low yielding, but constant from year to year.

Property developers often use SPVs for the same reasons, with a large emphasis on risk mitigation and access to funding. However, profits are generally more lumpy, with large loss making years and (hopefully) larger profit making years depending upon the development and sales cycle.

Impact of the year end date

There are several issues but the first to highlight is the effect a year end date has on tax.

The proposed increase in corporation tax rates to 25%, which have for many years been at a low of 19%, is well publicised. Should this still go ahead as proposed by the Johnson/Sunak government, this increase takes effect for profits arising after 1 April 2023. Of course, there is the potential for those rates to be changed. Either way, it will be important to plan ahead.

Apportioning profits

Assuming the rate goes ahead, it would mean that where a company’s financial year straddles 1 April 2023, the profits for that year are apportioned according to time, e.g. A company with a 30 September 2023 year end would see 6/12ths of its profits taxed at the higher rate and 6/12ths at the old rate, irrespective of when they were actually earned.

Of course, that would be fine if profits were generated evenly across the year (e.g. a property investor’s rental income), but what about a developer who sells units in January or February 2023? In this case, they would be taxed at a higher rate than the 19% that applied when they actually made the sales. Naturally, the opposite also applies in the first year of change, where the choice of company year-end could potentially bring down the rate of tax.

It may be easier to show these using some simplified examples :

This simplified example shows just one aspect of how planning ahead can help so take the time to consider the impact of future CT changes for your business. However, anyone thinking about this should take proper advice and think not just of the tax implications, but all factors.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

Comment on this...

The initial news from the ports on the first working day since the UK left the EU was positive in terms of smooth passage through the port, but with levels of traffic reduced and the finalisation of the deal only coming a few days before the holiday break, this may be a false sign.

UK VAT changes post Brexit – A brief overview

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 7th January 2021

Categories:

The initial news from the ports on the first working day since the UK left the EU was positive in terms of smooth passage through the port, but with levels of traffic reduced and the finalisation of the deal only coming a few days before the holiday break, this may be a false sign.

Nevertheless, here is a summary of some of the key changes. Please do bear in mind that this is a very brief snapshot of the rules. For more information see the HMRC Support page or contact us for specific advice tailored to your circumstances. Equally, there are different rules applicable to Northern Ireland.

Changes for those importing goods from EU member states to the UK

VAT for goods coming from the EU will now be treated as non-EU imports. The introduction of ‘postponed accounting’ for Import VAT from 1 Jan 2021 means that UK VAT registered businesses can account for import VAT at the time of their VAT return rather than having to pay it soon after the goods arrive in the UK.
Customs declarations will be required for all goods movements and the payment of any other duties will still be required.
Customs duty (tariffs) will apply to some goods.
Excise duties will continue to apply to tobacco, alcohol and certain energy products.
Customs and excise duty payments can be deferred by UK businesses to be settled monthly with a duty deferment account. Taxpayers will need to register with HMRC to open a duty deferment account and will need to provide a bank guarantee.
When selling to UK customers, UK VAT on transactions with a value of up to £135 will be collected at the point of sale.
This means that UK Supply VAT, rather than Import VAT, will be due on these items.
Businesses operating as Online marketplaces (OMPs), and facilitating the sale of imported goods, are responsible for collecting and accounting for UK VAT, even when the goods are in the UK at the point of sale.
Where goods are sold directly to UK consumers and sent from overseas, the overseas seller is required to register and account for UK VAT to HMRC. Overseas sellers are responsible for accounting for the VAT on goods in the UK when sold directly to UK consumers.
Business-to-business sales not exceeding £135 in value are also subject to the new rules. However, where the business customer is VAT registered and provides its VAT registration number to the seller, UK VAT will be accounted for by the customer by means of a reverse charge mechanism.

Exporting goods from the UK to the EU

VAT registered UK businesses continue to be able to zero-rate sales of goods to EU businesses.
EU member states will treat goods entering the EU from the UK in the same way as goods entering from other non-EU countries. This means import VAT and any customs duties (tariffs) are due when the goods arrive in the EU.

Common Transit Convention (CTC)

Businesses may be able to use the Common Transit Convention (CTC). Not only does this mean that customs duties and declarations will not have to be dealt with at every border, there but it also defers import VAT and customs duties until goods reach their final destination.

Guarantees

Businesses should check if a guarantee is needed to cover import VAT or customs duties while the goods are in transit. New procedures are being implemented to minimise the impact of this.

Distance Selling Threshold

Distance selling is where sales are made to non-taxable persons, eg, consumers or non-VAT registered businesses. Previously, exporters who had a low value of sales in other EU member states could benefit from the distance selling thresholds. Sales below the distance selling thresholds were subject to UK VAT unless the supplier had registered for VAT in the country of destination.
From 1 January 2021, this facility is no longer available.

EC Sales List

UK VAT registered businesses no longer have to complete an EC Sales List. Instead, UK businesses exporting zero-rated goods to EU businesses need to retain evidence to prove that goods have left the UK. Such evidence is already required for exports to non-EU countries.
For more information see HMRC support.

Supplying services to customers in EU member states

Place of supply

The supply of services to customers in the EU from 1 January 2021 is now treated the same as those to any customer outside the EU and is covered by the ‘place of supply’ rules.
These rules are complex and beyond the scope of this note.
Generally though, for UK businesses supplying digital services to non-business customers in the EU, the ‘place of supply’ continues to be where the customer resides. VAT on those services is therefore due in the EU member state in which the customer resides.
For UK businesses supplying certain insurance and financial services, the input VAT deduction rules changed from 1 January 2021. Supplies that were previously exempt became outside the scope with recovery, thereby aligning with the existing rules for supplies of such services to customers outside the EU.

Specific rules for digital services – Exports from UK to EU

After 31 December 2020, all supplies of digital services to consumers in EU member states are liable for VAT in the consumer’s member state and those sales must be declared to the relevant EU member state.
UK businesses that had been using the UK VAT Mini One Stop Shop “MOSS” union scheme will need to register for the VAT MOSS non-union scheme in an EU member state, for example, the Republic of Ireland is favoured due to language similarities.
For businesses wanting to continue using MOSS, they must register for the scheme by the 10th day of the month following their first sale after the UK leaves the EU. For example, register by 10 February 2021 if a sale is made in January 2021.
Alternatively, organisations can register in each EU Member State where they make sales. Check the EU’s Europa website for further information about registering for VAT in EU member states.
Non-UK businesses that had previously used UK VAT MOSS non-union scheme through the UK will now need to register for the scheme in an EU member state.

Specific rules for digital services – Exports from EU to UK

Non-UK businesses need to declare sales of digital services to UK consumers by registering for VAT in the UK and declaring the sales via a UK VAT return.

EU VAT refund system

UK businesses can continue to claim eligible refunds of VAT from EU member states, but it will need to be done using the existing refund system for non-EU businesses. The way in which the refund system operates varies across each EU country, so businesses will need to check the requirements in each EU country where they incur VAT.
How to claim a refund of VAT paid in an EU member state

EU VAT Registration Number Validation service

The EU VAT Registration Number Validation service allows businesses to check if a customer or supplier’s VAT number is valid. UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU businesses, but UK VAT registrations will cease to be included.
HMRC has developed a service to ensure that UK VAT numbers can continue to be validated.
- For checking EU VAT numbers: https://ec.europa.eu/taxation_customs/vies/
- For checking UK VAT number: https://www.gov.uk/check-uk-vat-number

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

Comment on this...

The developer ended up paying the right amount of tax based on what actually happened, but he paid a high price for not spotting, or being advised of the dangers that occupation of the property would bring.

Stamp Duty Land Tax – Losing the relief

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 3rd December 2020

Categories:

An interesting case on SDLT was concluded recently, whereby HMRC were successful in overturning a claim for relief from the 15% rate of SDLT, but unsuccessful in their attempts to charge penalties for an incorrectly filed SDLT return.

By way of a very brief background to what was set out in the case, a property developer, through his limited company bought a house to demolish and re-develop for resale. The company claimed relief from the 15% SDLT rate on the grounds of the re-development but after it was built, a number of events transpired, and he ended up occupying the house personally with his wife for a few months.

HMRC raised an enquiry. This led to the developer subsequently paying over the extra SDLT (which was 150% more than the SDLT originally paid). The grounds for this were that as a non-qualifying individual, the company would lose the relief, if he lived in the home for any period of time.

HMRC were not successful however, in their attempts to claim the penalties of circa 25% of the tax. The reason being that they failed to prove that the developer had intended to live in the property all along.

Lessons for Property Developers

The interesting points for me here are:
• HMRC did and do regularly raise enquiries for SDLT relief claims;
• The developer ended up paying the extra SDLT to 15%, on the basis that as soon as he took occupation (in the 3 year controlled period), he lost the right to that relief;
• The burden of proof was on HMRC to prove that the SDLT return had been inaccurately completed, which they couldn’t;
• a large part of that failure was due to their inability to disprove the developer’s intentions at the very start of the process, ie, when he acquired the property. Intentions are often irrelevant for SDLT purposes, which are more based on actual facts at the time of completion, but this is an interesting departure in the case of a relief to be claimed;
• it was suggested that if the company had not been ordinarily engaged in property development, HMRC would have had a stronger case.

I do feel for this developer.

Whilst he ended up paying the right amount of tax based on what actually happened, he paid a high price for not spotting, or being advised of the dangers that occupation of the property would bring, however innocent the reasoning for that was.

The message can only therefore be that one should always take advice before acting, and put all the facts on the table so the advisor can fully consider these.

And of course, the warning is that whenever a relief has been claimed, an extra cautious approach is needed. This applies across all taxes.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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With an increased compliance burden, the value of Gross Payment Certificates are heightened, and as such, construction businesses must ensure that their HMRC compliance history remains unblemished in spite of current pressures on cash.

Changes to the Construction Industry Scheme (CIS) 2020

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 19th November 2020

Categories:

Changes to the Construction Industry Scheme (CIS) are directed towards tacking abuse, and take effect from 6 April 2021. They include:

– Cost of materials – there will be more specific rules about what type of expenditure on materials can be deducted before calculating tax. This is to tackle inflated materials costs leading to lower deductions of tax.

– Deemed contractors – aimed at businesses outside the construction industry, but whom might incur substantial construction costs (over £3m). This introduces a requirement to review expenditure on a 12 month rolling basis, and register rather than at the end of each accounting year.

– Increased penalties for supplying false information to achieve Gross Payment Status.

– HMRC will gain the power to amend CIS deductions claimed by sub-contractors on monthly PAYE returns and reverse CIS claims accordingly. This could lead to enforcement proceedings, interest and penalties at much earlier stages in the cycle.

My take on this is that with an increased compliance burden, the value of Gross Payment Certificates are heightened, and as such, construction businesses must ensure that their HMRC compliance history remains unblemished in spite of current pressures on cash..

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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We want to reassure you that our service to you will continue, despite the disruption caused by the measures required in response to the Covid-19 pandemic.

Covid-19: Goodman Jones working remotely in order to support you

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 23rd March 2020

Categories:

We want to reassure you that our service to you will continue, despite the disruption caused by the measures required in response to the Covid-19 pandemic.

In line with government guidance, we are now working remotely but are able, and want to communicate with you in a number of ways.
We have built in flexibility so that we can communicate with you in a way that suits you. There is no “one-size-fits-all”.
We will no longer be attending physical meetings and have reinforced to all our people that they should practice social distancing, which includes avoiding public transport.
We have temporary procedures in place to ensure that Registered Office mail is forwarded.

Helping our clients has always been at our core and whilst these uncertain times may throw up daunting challenges, we are focused on ensuring that we remain available and able to help you.

Please don’t hesitate to contact us.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

Comment on this...

Covid-19 and Business Continuity

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 17th March 2020

Categories:

News

As the number of confirmed cases of Coronavirus (COVID-19) rises, and with the situation continually changing, we want to reassure you of the measured and considered steps we are taking to ensure that our service to you suffers minimal disruption.

The steps we are taking balance the risk and safety of our respective teams, and the continuity of our high levels of service.

People are at the heart of our business.

We are diligently following the government guidelines on protecting ourselves and others and have escalated procedures to ensure that the working environment is clean and hotspot areas are regularly sanitised.
Where we have agreed to visit your offices, or attend meetings with you or your team we will follow your preferred protocol.
We ask all visitors to Goodman Jones to consider whether they pose a risk to others.
Our staff will self-isolate if there is any cause for concern.
We will not take avoidable risks.

Business Continuity at Goodman Jones

We have a detailed business continuity plan already in place which allows us to work during this type of situation.

We are enabled to work remotely, ensuring that service levels will be maintained.
Hardware, software and communications channels are in place.
We can build flexibility in the way we communicate with you. There is no “one size fits all” approach.
Insofar as government policy permits, we do not anticipate major disruption in day-to-day working; our focus is on providing you with a seamless service.

Your Business Continuity

Helping our clients has always been at our core and whilst these uncertain times may throw up daunting challenges, we are focused on ensuring that we remain available and able to help you.

If you have any concerns or questions about any of the above, or very importantly, how you see these events affecting the future of your business, please don’t hesitate to speak to us.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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We are always looking for ways to improve our service and the quality of our client experience so we are excited about the ideas and experience that Figen is bringing

Figen Davies joins Goodman Jones as Practice Manager

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 31st January 2020

Categories:

News

We are delighted to welcome Figen Davies to the firm in the role as Practice Manager.

Cetin Suleyman, Managing Partner said, “Figen brings considerable expertise to the role and has an impressive track record in business support, particularly in continuously evolving processes and systems, both people and technology driven. We are always looking for ways to improve our service and the quality of our client experience so we are excited about the ideas and experience that Figen is bringing.”

Figen said, “I will be working to ensure that we are making the best use of our time and talents so that we are focused on delivering the best service for our clients.”

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

Comment on this...

I believe the key impact to be possibly one of cash-flow, rather than tweaks to accounting systems and administrative processes, the extension can help businesses have a bit more certainty on their own cash positions.

Construction Industry and the VAT Reverse Charge – Is this a welcome extension of time?

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 10th September 2019

Categories:

Changes to VAT in the construction industry have been delayed from 1 October 2019 to 1 October 2020.

The date on which the new rules were to come into effect was fast approaching but the original deadline of 1 October, being 30 days before the UK was due to leave the EU, has been extended by 12 months.

Putting aside the distraction that construction businesses have gone through to get ready for these changes, the delay has to be welcome, considering everything else they need to contend with in the coming months.

So with further time to plan, here’s a reminder of the main points:

What does the domestic reverse charge do?

Effectively, it puts the responsibility for paying VAT over to HMRC on the customer.
Until the change, that responsibility is with the supplier who raises the invoice and adds VAT to it.
Going forward both customer and supplier must make certain entries on their VAT returns to record what’s happening.

What is the effect on cash-flow?

There will be winners and losers.
Businesses affected will no longer receive the “gross” invoice value from their customers.
Similarly, they will no longer pay the “gross” invoice value to their suppliers.
In essence, any cash flow benefit that a business has under the current rules is eliminated under the reverse charge. This could cause issues for some.
Example:
- Assume a construction service with a value of £1m.
- Presently the sub-contractor would charge their customer £1.2m (£1m plus VAT).
- That sub-contractor would account for the £200k to HMRC.
- Depending on payment terms and commercial agreement it is possible that some sub-contractors would receive the £200k VAT before having to pay it to HMRC.
- Others however, would need to finance the £200k because their VAT payment date falls before they receive payment of their invoice.
- Applying a reverse charge would have a negative cash flow impact on the former whilst a positive impact on the latter.
We strongly recommend therefore that businesses fully get to grips with the cash-flow implications and model the cash-flow impact on them well ahead of the new implementation date of 1 October 2020.

Of course, the above applies only where businesses are affected by the reverse charge, so here are some pointers to assist in understanding more about it.

Where does the domestic reverse charge apply?

It doesn’t apply in all situations. For example:

It usually won’t apply when the customer is an end-user eg, a property owner or property developer. In this case, the contractor must charge VAT on their invoice in the traditional way.
It will apply when a sub-contractor provides construction services to a contractor, who then re-charges those services on up the chain. I’ll call these “mid-stream” contractors for this article.

What does the domestic reverse charge apply to?

Specific activities, broadly in line with the Construction Services definitions in the Construction Industry Scheme (“CIS”) rules; broadly anything building, altering, repairing or demolishing buildings or land.
If there’s any element of construction involved in a supply, the reverse charge applies to the whole supply.
The reverse charge does not apply to zero rated supplies.
So, the first challenge is for any contracting business to go through its contracts and decide which of them make its customers “end users”, and which of them will need the “reverse charge”.

Considerations for suppliers of construction services

What if my customer is an end-user?

If you supply to an end-user, eg, a property developer, or a property owner, then you must charge VAT on your invoices in the traditional way.
The customer must pay the gross invoice value (including VAT) to you.
You must pay the VAT over to HMRC on its normal VAT return dates.
In some cases, whether the customer is an end user or not is not obvious, for example, in a property development group there may be one company that engages all sub-contractors for the individual companies (Special Purpose Vehicles) across the group.
It’s advisable therefore to confirm with the customer ahead of raising any invoices, that they are an end-user and HMRC suggest they provide you with the following wording:

“We are an end user for the purposes of section 55A VAT Act 1994 reverse charge for building and construction services. Please issue us with a normal VAT invoice, with VAT charged at the appropriate rate. We will not account for the reverse charge.”

What if our customer is a mid-stream contractor?

Where the customer is part of the construction chain and they do not have an interest in the land or buildings on which the work is being carried out, then the domestic reverse charge is likely to apply.
You, as the supplier, raise the invoice showing the net amount. You should show the VAT amount, but must not charge it as VAT. This is a very subtle point.
All other aspects of the invoice remain as before, eg, VAT number, description, numbering etc.
The invoice should state that the reverse charge is being operated. HMRC suggests:

“Reverse charge: S55A VATA 94 applies. Customer to pay the VAT to HMRC.”

You, as supplier, are paid the invoice value ie, the net of VAT amount.
You enter the net amount of the invoice on its VAT return.
You make no payment of VAT to HMRC for that invoice.

Considerations for recipients of construction services

What if I am an end user?

The end-user will generally have an interest in the land or buildings being worked on.
Expect to provide confirmation to suppliers of that fact (see above)
Generally nothing will change for end-users.
You’ll receive invoices with VAT added as before
The usual checks and VAT reclaim processes will apply as before.

What if am a contractor receiving and making onward supplies of construction services?

Invoices received for qualifying work should state that the reverse charge applies.
The invoice will be for the total amount, but the “VAT” element will not be charged as VAT. Again, a very subtle distinction.
The invoice must in all other respects be a valid VAT invoice, eg, VAT number etc.
You, as the customer, must enter an amount equivalent to the VAT that is due in the Output Tax box of your VAT return.
It’s important that the correct VAT rate is used.
Where the VAT is recoverable, then the amount of recoverable VAT should be entered as Input VAT, and the net amount included as Net Inputs (Box 7).

What other complexities are there?

Even though HMRC have said they will approach things with a light tough in the first 6 months, there is lots to consider:

Software systems need to be able to cope with putting just the output VAT in Box 1 with no Net Outputs in Box 6.
Self-billing and authenticated receipt procedures need careful consideration.
The onus is on the customer to apply the correct rate of VAT (eg, standard / reduced rate / zero rate).
The nature of the supplies need to be decided as being in or out of this scheme. Mixed supplies of construction services and other services need to be looked at more carefully.
VAT cash accounting can throw up issues.
Certain types of work have specific rules.
The interaction with the Construction Industry Scheme can add an extra element of confusion.

Conclusion

It’s all somewhat ironic of course – given that the VAT Reverse Charge has until now mostly been used for sales and purchases between EU member states.

Nevertheless, given that I believe the key impact to be possibly one of cash-flow, rather than tweaks to accounting systems and administrative processes, the extension can help businesses have a bit more certainty on their own cash positions; and of course we all hope, there will be a less unpredictable political and economic environment in which to adjust, once these rules come into force.

We can assist in both the technical and administrative aspects of understanding and applying the new rules, and also the practical, commercial implications of modelling the cash impact on your business. Regrettably we can’t do much to help with the economic or political situations!

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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“Over and above his technical expertise, Paul’s overriding desire is to be a trusted adviser to his clients, helping them to achieve their objectives and ambitions. This is the hallmark of a Goodman Jones Partner.

Paul Bailey joins Goodman Jones

Cetin Suleyman - Partner - csuleyman@goodmanjones.com

Posted on 1st May 2019

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Goodman Jones is delighted to announce that Paul Bailey has joined the firm as a partner, as of 1st May.

Paul advises businesses looking to grow, either organically or through acquisition and then works to optimise the position for owners at the eventual point of exit. He has worked on a varied portfolio of organisations that includes listed companies and international groups, as well as owner-managed companies.

Over his career, Paul has developed a deep expertise in property and construction. He advises growing clients in that sector, not just on technical matters but by ensuring that the business owners receive the advice they need to help to fulfil their long term aims and objectives.

Cetin Suleyman, Managing Partner said, “We are delighted to welcome Paul into the firm as a partner and are particularly excited about the experience he brings to further invest in and develop our Property & Construction expertise.”

Paul said, “I am really looking forward to joining the Goodman Jones team and adding my real estate and construction expertise to assist, advise and support the firm’s clients. I am also very excited about exploring new ways to further enhance how we look after Goodman Jones clients and attract new clients to this very dynamic firm.’’

Cetin concluded, “Over and above his technical expertise, Paul’s overriding desire is to be a trusted adviser to his clients, helping them to achieve their objectives and ambitions. This is the hallmark of a Goodman Jones Partner.”

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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