Domestic Reverse charge VAT and Air conditioning supplies.

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 Air conditioning supplies and VAT Treatment

Where an air conditioning company supplies the installation of Air conditioning to another CIS registered business it will come under the new domestic reverse charge regime. Normally this applies to supplies between contractor and sub-contractor who come under the CIS. This starts as of 1 March 2021.

The main objective of this measure is to prevent Missing Trader Fraud where suppliers would go AWOL with VAT belonging to HMRC.

Any checks I need to make for the domestic reverse charge?

It is important to check valid VAT number and CIS number of customers when applying the domestic reverse charge.

Who should the VAT be shown to?

Only the end consumer does not need to pay apply reverse charge. They should be given a normal VAT invoice.

When do I apply the Reverse charge on air conditioning services?

SO to recap:

If it is air conditioning supplies

• To a contractor or a developer in the supply chain;
• Who is not an end user, such as the property owner, or directly to a main contractor that sells or lets a newly completed building;
• Who is registered under CIS;
• And is registered for VAT;
• The supply is not exempt from VAT; and
• the customer has given NO written confirmation that they are the final/end user or intermediary supplier

Then you would need to apply the domestic reverse charge.

Impact

This could impact cash flow for business in the supply chain.

Insignificant supplies of the main supply- 5% disregard rule which appears to operate in this scenario where, if the value of the supply subject to the Reverse Charge is 5% or less than the total consideration, the Revers

Invoices should make it clear that the Reverse charge applies using appropriate wording such as:

“Reverse charge: Customer to pay VAT to HMRC”

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