Ireland's Revenue Commission announced on Wednesday that from 1st September, new rules are to apply to principal contractors and sub-contractors involved in construction operations to which RCT applies (but excluding haulage for hire).
From the beginning of September the charge the sub-contractor makes to a principal contractor will not include VAT.
Instead, the principal contractor will calculate the VAT on the amount charged by the sub-contractor, and account for the VAT directly to the Revenue Commissioners through his/her VAT return.
While the overall net amount of VAT payable on construction services will remain unchanged, the reverse charge will entail a significant change in VAT payment patterns and administrative practices for many taxpayers.
The Revenue have stressed that it is essential that clients are aware of the need to begin to prepare for the change at this stage, to ensure a smooth transition to the new system from 1st September.
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