Subcontractors & vat- new rules

hannahmum

Hi,

Re: the new vat rules for Suncontractors & Vat. Can anyone advise on the actual accounting entries required? I have rec'd an invoice from a subcontractor. They have stated 'Vat on this supply to be accounted for by the principle contractor'- I guess thats us?

I have looked on the revenue.ie, it seems to be saying I should account for this vat as vat on sales & vat on purchases- one to cancel out the other? How on earth does one go about this? And- I assume I just pay the contractor the amt of their invoice- ie net of vat?

Any help appreciated! Thanks.

Mr. Incognito

You are the principal contractor.

You pay the amount on the invoice plus VAT.

You can reclaim this VAT in your VAT return.

hannahmum

Hi SetantaL,

Simple as that? Thanks!

Mr. Incognito

VAT is pretty straightforward generally.

ams

SetantaL wrote: »

You are the principal contractor.

You pay the amount on the invoice plus VAT.

You can reclaim this VAT in your VAT return.

Hi SetantaL

From what Im reading above you are advising that the subbie be paid the invoice amount Plus Vat.

From my understanding you just pay the subbie what is on the invoice. Then you calculate the Vat which would have been paid on top of this amount and include it in your return - this is cancelled out by the Vat you calcultated on the purchase invoice.

Ie this is just a paper transaction which takes place on the Vat return - you dont pay anyone the vat.

Legend100

Yes ams this is purely a paper transaction. There will be no effect in your system. You get an invoice from a subbie at net with no vat. You pay this amount (as long as you have a payments card!!!) and then you work out what the vat would have been .ie at 13.5% and then add this to vat on sales and vat on purchases in your vat 3. There is no vat effect overall

Mr. Incognito

Okay had to get off my arse and look this up.

http://www.revenue.ie/leaflets/construction-services-new-rules.pdf

From 1 September 2008 the charge the sub-contractor makes to a principal contractor does not include VAT.
Instead the principal contractor calculates the VAT on the amount charged by the sub-contractor and pays the VAT
directly to the Revenue Commissioners through his/her VAT return.
Does the new system apply to all services supplied by a
sub-contractor?
No. VAT on construction services that are not subject to RCT will continue to be taxed under the normal VAT
system. For example, a builder who builds an extension for a private individual, or an electrician who installs a new
alarm system in a shop should charge and account for VAT on the supply. The reverse charge does not apply to
these supplies.

So, I was half wrong and half right. Paying with VAT has been changed from 1 Jan 08 but only for RCT construction services

What's the nature of the sub-contract work?

kluivert

Any Sub Contractor raising an invoice to a Principal Contractor are not required to charge VAT on their Invoice.

All other circumstances Vat is to be charged.

Connie-Kal

Mr. Incognito, I think this is operative only from 1st September 2008, not from 1st January. Kal