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Construction industry VAT reverse charge question

  • 10-03-2015 5:43pm
    #1
    jonniebgood1
    Registered Users, Registered Users 2 Posts: 3,578 ✭✭✭


    To pick the brain of some of the regular contributors here I have a query in relation to a VAT as follows:

    My company regularly undertakes work for a large industrial company which I'll call 'X' for the purpose of this query. In undertaking this work when I send an invoice I include the note "VAT by Principle contractor" as per reverse charge instructions in the construction industry. My understanding of this is clear that we are acting correctly however I recently have a new situation that leads to this query:
    We have recently carried out work where we are sub-contracted to another firm (say 'Y') carrying out works for original company 'X'. My question is that when I am sub-contracted in this way but ultimately 'X' as Principal repay the VAT as is their role/duty, do I invoice the company 'Y' that is employing me in this way with the same note ("VAT by Principle contractor") or should I be charging VAT on this. My view is that 'X' will still be the Principal so I should not charge the VAT on this invoice however I am unsure and would appreciate advice on this?


Comments

  • #2
    Alan Shore
    Registered Users, Registered Users 2 Posts: 735 ✭✭✭Alan Shore


    Is "Y" a Principal? If so the Reverse charge applies, if not then it does not.

    Have they indicated that RCT applies to your payment.


  • #3
    jonniebgood1
    Registered Users, Registered Users 2 Posts: 3,578 ✭✭✭jonniebgood1


    Alan Shore wrote: »
    Is "Y" a Principal? If so the Reverse charge applies, if not then it does not.

    Have they indicated that RCT applies to your payment.

    Thanks alan.
    Y in this case are not the principal contractor. They are however working for a principal.

    Your RCT question is helpful. If they intend to check RCT it indicates the VAT should not apply as i see it. This has not been indicated.


  • #4
    SRASE
    Registered Users, Registered Users 2 Posts: 86 ✭✭SRASE


    The definition of a principal contractor includes:

    "a subcontractor who subcontracts all or part of the contract to a subcontractor."

    If you are subcontracted by Y then you invoice them and include the normal VAT disclosure "VAT on this supply is to be accounted for by the Principal Contractor".

    Y is the principal contractor in your relationship with them. It does not matter that there is a main contractor who Y invoices.

    So for RCT Y is your principal contractor and X is Y's Principal contractor.

    The above assumes that the work falls within the meaning of construction operations.


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