The Construction Industry Scheme (CIS) VAT reverse charge

The Construction Industry Scheme (CIS) VAT reverse charge

The Construction Industry Scheme (CIS) VAT reverse charge- From 1 March 2021, are you ready?

The new reverse charge will apply to supplies of construction work from 1 March 2021 but only to supplies made business to business.

What is it?

The reverse charge will apply when all the following are met:

  • The supply for VAT consists of services and materials that fall under the CIS scheme. For more details
  • The supply is subject to a standard or reduced-rate of VAT.
  • Where both the supplier and customer are registered for UK VAT and CIS
  • The customer intends to make an ongoing supply of construction services to another party.
  • The 2 parties cannot be connected

The CIS reverse charge does not apply :

  • Where the supply would normally be VAT exempt
  • Where supplies are not covered by the CIS unless linked to such a supply.
  • Where only staff are supplied e.g. as an agency where the supplying business does not oversee the construction.
  • Where your customer is not VAT registered
  • Where your customer is an End User or Intermediary supplier. For end-users, you should get written confirmation on paper, in an email or in a contract. For more details.

Other situations to note

  • If there is a reverse charge element in a supply, then the whole supply will be subject to the domestic reverse charge.
  • If there has already been a reverse charge service between two parties on a construction site, and if both parties agree, any subsequent construction supplies on that site between the same parties can be treated as reverse charge services.
  • If the reverse charge applies to more than 5% of contracts (by volume or value) with a sub-contractor, then the reverse charge may be applied to all the contracts.

If a customer has not given written confirmation of their end-user or intermediary supplier status, the supplier must assume that the reverse charge applies and will not charge VAT to the customer.

Things to Consider

  • Does your software cope with reverse charges? We are able to help you with solutions if your software does not.
  • You may not be able to use flat rate or cash accounting
  • Your cash flow may be affected
  • Consider including new terms on your quotes to state you will treat all customers as end-users unless they tell you otherwise so you can continue using the old VAT method.

Do you use XERO?

The reverse charge module is now live in the software. There is also going to be a webinar on the subject on 26th Feb at 10 am that should be available for download after the event.

For more details on how to operate the scheme and applicable dates see the details on our website

If you need help, please get in touch


Content kindly supplied by Maynard Johns Chartered Accountants



Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

They have now confirmed that all self-employed businesses and landlords who have an annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023. This will mean the quarterly reporting of profits and accurate software will be essential to cope with this.

If you are not VAT registered this will be your first contact with this scheme. It may seem a long way away but planning will be key to making this as easy as possible for you.

We will be discussing this with you over the next 12 months to discuss your options and how we can help you but if you want to get ready now and embrace Digital accounting get in touch now.

Read more about the benefits of cloud accounting.


Content kindly supplied by Maynard Johns Chartered Accountants

Pensions – Tax Reliefs

Types of pension schemes

There are two broad types of pension schemes from which an individual may eventually be in receipt of a pension:

          Workplace pension schemes

          Personal Pension schemes.

A Workplace pension scheme may either be a defined benefit scheme or a money purchase scheme.

A defined benefit scheme pays a retirement income related to the amount of your earnings, while a money purchase scheme instead reflects the amount invested and the underlying investment fund performance.

The number of defined benefit pension schemes has declined in recent years in part due to the regulations imposed upon the schemes and the cost of such schemes to the employer.

All employers will soon need to provide a workplace pension scheme due to auto-enrolment legislation and these are likely to be money purchase schemes.

A Personal Pension scheme is a privately funded pension plan but can also be funded by an employer. These are also money purchase schemes. Self-employed individuals can have a Personal Pension.

We set out below the tax reliefs available to members of a money purchase Workplace scheme or a Personal Pension scheme.

It is important that professional advice is sought on pension issues relevant to your personal circumstances.

What are the tax breaks and controls on the tax breaks?

To benefit from tax privileges all pension schemes must be registered with HMRC. For a Personal Pension scheme, registration will be organised by the pension provider.

A money purchase scheme allows the member to obtain tax relief on contributions into the scheme and tax free growth of the fund. If an employer contributes into the scheme on behalf of an employee, there is, generally no tax charge on the member and the employer will obtain a deduction from their taxable profits.

When the ‘new’ pension regime was introduced from 6 April 2006 no limits were set on either the maximum amount which could be invested in a pension scheme in a year or on the total value within pension funds. However two controls were put in place in 2006 to control the amount of tax relief which was available to the member and the tax free growth in the fund.

Firstly, a lifetime limit was established which set the maximum figure for tax-relieved savings in the fund(s) and has to be considered when key events happen such as when a pension is taken for the first time.

Secondly, an annual allowance sets the maximum amount which can be invested with tax relief into a pension fund. The allowance applies to the combined contributions of an employee and employer. Amounts in excess of this allowance trigger a charge.

There are other longer established restrictions on contributions from members of money purchase schemes (see below).

Key features of money purchase pensions

          Contributions are invested for long-term growth up to the selected retirement age.

          At retirement which may be any time from the age of 55 the accumulated fund is generally turned into retirement benefits – an income and a tax-free lump sum.

          Personal contributions are payable net of basic rate tax relief, leaving the provider to claim the tax back from HMRC.

          Higher and additional rate relief is given as a reduction in the taxpayer’s tax bill. This is normally dealt with by claiming tax relief through the self assessment system.

          Employer contributions are payable gross direct to the pension provider.

Persons eligible

All UK residents may have a money purchase pension. This includes non-taxpayers such as children and non-earning adults. However, they will only be entitled to tax relief on gross contributions of up to £3,600 per annum.

Relief for individuals’ contributions

An individual is entitled to make contributions and receive tax relief on the higher of £3,600 or 100% of earnings in any given tax year. However tax relief will generally be restricted for contributions in excess of the annual allowance.

Methods of giving tax relief

Tax relief on contributions are given at the individual’s marginal rate of tax.

An individual may obtain tax relief on contributions made to a money purchase scheme in one of two ways:

          a net of basic rate tax contribution is paid by the member with higher rate relief claimed through the self assessment system

          a net of basic rate tax contribution is paid by an employer to the scheme. The contribution is deducted from net pay of the employee. Higher rate relief is claimed through the self assessment system.

In both cases the basic rate is claimed back from HMRC by the pension provider.

A more effective route for an employee may be to enter a salary sacrifice arrangement with an employer. The employer will make a gross contribution to the pension provider and the employee’s gross salary is reduced. This will give the employer full income tax relief (by reducing PAYE) but also reducing National Insurance Contributions.

There are special rules if contributions are made to a retirement annuity contract. (These are old schemes started before the introduction of personal pensions.)

The annual allowance

For 2017/18 onwards the annual allowance is £40,000.

Any contributions in excess of the £40,000 annual allowance are potentially charged to tax on the individual as their top slice of income. Contributions include contributions made by an employer.

The stated purpose of the charging regime is to discourage pension saving in tax registered pensions beyond the annual allowance. Most individuals and employers actively seek to reduce pension saving below the annual allowance, rather than fall within the charging regime.

Individuals who are eligible to take amounts out of their pension funds under the flexibilities introduced from 6 April 2015 but who continue to make contributions into their schemes may trigger other restrictions in the available annual allowance. This is explained later in this factsheet in ‘Money Purchase Annual Allowance’.

Lower annual allowance for those with ‘adjusted annual incomes’ over £150,000

From April 2016 a taper has been introduced which restricts the annual allowance available for those with ‘adjusted annual incomes’ over £150,000. Adjusted income means, broadly, a person’s net income and pension contributions made by an employer. For every £2 of adjusted income over £150,000, an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000.

The rate of charge if annual allowance is exceeded

The charge is levied on the excess above the annual allowance at the appropriate rate in respect of the total pension savings. There is no blanket exemption from this charge in the year that benefits are taken. There are, however, exemptions from the charge in the case of serious ill health as well as death.

The appropriate rate will broadly be the top rate of income tax that you pay on your income.


Anthony, who is employed, has taxable income of £120,000 in 2018/19. He makes personal pension contributions of £50,000 net in March 2019. He has made similar contributions in the previous three tax years.

He will be entitled to a maximum £40,000 annual allowance for 2018/19. The charge will be:

Gross pension contribution


Less annual allowance



£22,500 taxable at 40% = £9,000

Anthony will have had tax relief on his pension contributions of £25,000 (£62,500 x 40%) and now effectively has £9,000 clawed back. The tax adjustments will be made as part of the self assessment tax return process.

Carry forward of unused annual allowance

To allow for individuals who may have a significant amount of pension savings in a tax year but smaller amounts in other tax years, a carry forward of unused annual allowance is available.

The carry forward rules apply if the individual’s pension savings exceed the annual allowance for the tax year. The annual allowance for the current tax year is used before any unused allowance brought forward. The earliest year unused allowance is then used before a later year.


Assume it is March 2019. Bob is a self employed builder. In the previous three years Bob has made contributions of £30,000, £10,000 and £30,000 to his pension scheme. As he has not used all of the £40,000 annual allowance in earlier years, he has £50,000 unused annual allowance that he can carry forward to 2018/19.

Together with his current year annual allowance of £40,000, this means that Bob can make a contribution of £90,000 in 2018/19 without having to pay any extra tax charge.

Unused annual allowance carried forward is the amount by which the annual allowance for that tax year exceeded the total pension savings for that tax year.


This effectively means that the unused annual allowance of up to £40,000 can be carried forward for the next three years. Importantly no carry forward is available in relation to a tax year preceding the current year unless the individual was a member of a registered pension scheme at some time during that tax year.

The lifetime limit

The lifetime limit sets the maximum figure for tax-relieved savings in the fund at £1,030,000 for 2018/19, increasing to £1,055,000 for 2019/20. 

If the value of the scheme(s) exceeds the limit when benefits are drawn there is a tax charge of 55% of the excess if taken as a lump sum and 25% if taken as a pension.

Accessing your pension – freedom

Individuals have flexibility to choose how to access their pension funds from the age of 55. The options include:

          a tax free lump sum of 25% of fund value

          purchase of an annuity with the remaining fund, or

          income drawdown (see below for options available regarding flexi access accounts and lump sum payments).

An annuity is taxable income in the year of receipt. Similarly any monies received from the income drawdown fund are taxable income in the year of receipt.

Flexi access accounts and lump sums

Where a lump sum and annuity are not taken access to the fund can be achieved in one of two ways:

          allocation of a pension fund (or part of a pension fund) into a ‘flexi-access drawdown account’ from which any amount can be taken over whatever period the person decides

          taking a single or series of lump sums from a pension fund (known as an ‘uncrystallised funds pension lump sum’).

When an allocation of funds into a flexi-access account is made the member typically will take the opportunity of taking a tax free lump sum from the fund.

The person will then decide how much or how little to take from the flexi-access account. Any amounts that are taken will count as taxable income in the year of receipt.

Access to some or all of a pension fund without first allocating to a flexi-access account can be achieved by taking an uncrystallised funds pension lump sum.

The tax effect will be:

          25% is tax free

          the remainder is taxable as income.

Money Purchase Annual Allowance (MPAA)

The government is alive to the possibility of people taking advantage of the flexibilities by ‘recycling’ their earned income into pensions and then immediately taking out amounts from their pension funds. Without further controls being put into place an individual would obtain tax relief on the pension contributions but only be taxed on 75% of the funds immediately withdrawn.

The MPAA sets the maximum amount of tax efficient contributions in certain scenarios. The allowance is currently set at £4,000 per annum. 

There is no carry forward of any of the annual allowance to a later year if it is not used in the year.

The main scenarios in which the reduced annual allowance is triggered are if:

          any income is taken from a flexi-access drawdown account, or

          an uncrystallised funds pension lump sum is received.

However just taking a tax-free lump sum when funds are transferred into a flexi-access account will not trigger the MPAA rule.

How we can help

This information sheet provides general information on the making of pension provision. Please contact us for more detailed advice if you are interested in making provision for a pension.

maynard johns bideford

About The Author

This business advice has been created by Chamber member Maynard Johns accounts & Business Advisors, who offer expert services to businesses in the area.  

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Making Tax Digital for VAT


Over the coming years, the government will phase in its landmark Making Tax Digital (MTD) initiative, which will see taxpayers move to a fully digital tax system. 

This factsheet outlines some of the key issues for businesses.

Making Tax Digital for Business

Making Tax Digital for Business (MTDfB) was introduced by then Chancellor, George Osborne, in the 2015 Spring Budget. The government’s ‘Making Tax Easier’ document was published shortly after, and outlined plans for the ‘end of the tax return’. It also set out the government’s vision to modernise the UK’s tax system, with digital tax accounts set to replace tax returns for ten million individuals and five million small businesses. 

Revised timescales

However, industry experts and those within the accountancy sector expressed concerns over the proposed pace and the scale of the introduction of MTDfB, and, as a result, the government amended the timetable for the initiative’s implementation, to allow businesses and individuals ‘plenty of time to adapt to the changes’.

MTDfB, starting with VAT will now be implemented from 1 April 2019, as summarised below.  

Making Tax Digital for VAT

From 1 April 2019, businesses will be mandated to use the MTDfB system to meet their VAT obligations. Under the new rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software.

The new rules have effect from 1 April 2019, where a taxpayer has a ‘prescribed accounting period’ which begins on that date, and otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. The exception to this is a small minority of VAT-registered businesses with more complex requirements who will not be mandated to comply with MTD for VAT until 1 October 2019.

The six month deferral applies to businesses who fall into one of the following categories: trusts; ‘not-for-profit’ organisations that are not set up as a company; VAT divisions; VAT groups; those public sector entities required to provide additional information on their VAT return (government departments, NHS trusts); local authorities; public corporations; traders based overseas; those required to make payments on account; and annual accounting scheme users. HMRC expects that the deferral will apply to around 3.5% of mandated businesses.

HMRC is piloting MTD for VAT ahead of its introduction in April 2019.

VAT returns

Those businesses that fall within the scope of MTDfV will be required to submit their VAT returns using software compatible with the MTDfV regulations. Information will be extracted from the digital records in order to populate the VAT return.

There will be no changes to the statutory VAT return or payment dates. In addition, businesses who choose to submit VAT returns monthly or in a non-standard fashion will be able to continue to do so.   

Using third party software and keeping digital records

Under MTDfV, businesses must make use of functional compatible software to meet the new requirements. VAT returns will be calculated and submitted to HMRC via an Application Program Interface (API). Submission can be from software, bridging software or API-enabled spreadsheets.

HMRC acknowledges there will be different ways to do this. However, the transfer of data to HMRC, from the mandatory digital records to the filing of the return, must be entirely digital. HMRC has published VAT Notice 700/22: Making Tax Digital for VAT, setting out requirements in more detail.

Under MTD, manual record keeping will not be acceptable. Specified records will have to be kept digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an API’, which must be capable of:

      keeping records in digital form as specified by the new rules

      preserving digital records in digital form for up to six years

      creating a VAT return from the digital records held in compatible software and submitting this data to HMRC digitally

      providing HMRC with VAT data on a voluntary basis 

      receiving information from HMRC via the API platform.


Records to be kept digitally are specified in the VAT Notice. They include ‘designatory data’; the VAT account linking primary records and VAT return; and information about supplies made and received. Requirements are more extensive than at present, for example in relation to supplies made, where it will be necessary to record the different rates of VAT applicable. For supplies received, the amount of input tax to be claimed will be needed.

MTD is not completely paper-free, and it does not mean businesses are mandated to use digital invoices and receipts. Some records will still be kept in hard copy, such as the C79 import VAT certificate. However, the actual recording of supplies made and received must be digital. Where invoices and receipts aren’t held digitally, they should be kept in hard copy as usual for VAT purposes.

Software issues

The digital records required for MTD don’t have to be held in one place or one program. Businesses can keep digital records in a range of different compatible digital formats. The use of spreadsheets is allowed, in combination with add-on MTD software.

If the information is prescribed as part of the ‘digital journey’, the mandatory submission process, it must be transferred via ‘digital link’. The new VAT Notice defines these.

Digital links

A digital link is a transfer or exchange of digital data between software programs, products or applications. Where a set of software products is used, there must be digital links between them, and once data is entered into the software, any further transfer or modification must be via digital link.

Manual data transfer is not allowed under MTD. An example would be noting details from invoices in one ledger, then using that handwritten information to update manually another part of the functional compatible software. Copying by hand or manual transposition of data between two or more pieces of software and ‘cut and paste’, or ‘copy and paste’, will not be acceptable in the long-term. There are, however, some transitional arrangements (see below).

The VAT Notice outlines acceptable digital links, including:

  • linked cells in spreadsheets
  • emailing a spreadsheet with digital records to an agent for the agent to import data into software to make a calculation, such as a partial exemption calculation
  • transferring digital records onto portable devices (pen drive, memory stick) and giving these to an agent
  • XML, CSV import and export, download and upload of files
  • automated data transfer
  • API transfer.

Transition: soft landing penalty period

For VAT return periods beginning between 1 April 2019 and 31 March 2020, penalties will not be charged if businesses don’t have digital links between software programs. This means ‘cut and paste’ will be acceptable while businesses update their systems. However, from 2020, HMRC will penalise non-compliance.

The transfer of VAT return data to bridging software to make submission to HMRC must always be digital, and is excluded from the soft landing provisions.

Software providers

HMRC is not providing software. It is currently working with software providers to get products on the market by the MTD start date, and will list recognised products on the site as they become ready. An initial list can be found at

If you already use accounting software and your supplier is not on this list, ask if and when they will upgrade products to be MTD-compatible.


Under MTDfV, only a small handful of businesses will be exempt. Please contact us if you believe your business may be exempt. Businesses will be able to make a right of appeal against a HMRC refusal of exemption.

How we can help

No matter if your business is big or small, MTD will undoubtedly affect you. As your accountants, we can help you to prepare for the changes ahead of the implementation of MTDfV in April 2019.   

For more information, please contact us.



maynard johns bideford

About The Author

This business advice has been created by Chamber member Maynard Johns accounts & Business Advisors, who offer expert services to businesses in the area.  

View their listing

Insuring Your Business


When starting a new business, you will no doubt recognise the need for insurance. It can provide compensation and peace of mind should things go wrong but can also represent a significant cost.

In this factsheet we consider the different types of insurance you need to consider.

Compulsory insurance

Employers’ liability insurance is compulsory to cover your employees. By law you must have at least £5 million of cover and this must come from an authorised insurer, although a minimum of £10 million is now provided by most policies. You must display the certificate of insurance in the workplace. If your business is not a limited company, and you are the only employee or you only employ close family members, you do not need compulsory employers’ liability insurance. Limited companies with only one employee, where that employee also owns 50% or more of the company’s shares, have also been exempt from compulsory employers’ liability insurance.

Motor vehicles liability insurance is also compulsory and must cover third party insurance: this is the legal minimum.

Optional insurance

Other categories of insurance are optional and a decision as to whether or not you need cover under any given heading will depend on the nature of your business and an assessment of the risks.

Public liability

Although strictly this is not compulsory you will almost certainly feel that you need cover under this heading. It covers claims for damages to third parties.


You can think about limiting cover to specific risks such as fire and flood or providing more general cover. Consider the level of cover you would need for the premises (if you own the building), equipment and stock. If you rent your premises then you should check that the landlord has the appropriate cover.


If your business does not involve expensive items of equipment then you might decide to pass on this one, at least initially. If you do decide to provide cover for theft then an insurer will require a reasonable minimum level of security.

Professional indemnity

This is only likely to be necessary if you give advice which could make you liable. It protects against any loss suffered by your customers as a result of negligent advice. In some professions it is compulsory – examples being the law, accountancy and financial services. However it is common in other sectors such as computer consultancy and publishing.

Business interruption

This covers compensation for lost profits and extra costs if your business is disrupted, due to say a fire. It is also referred to as ‘consequential loss’ insurance.

Key man

A small business is often dependent on key members of staff. What would happen if they became seriously ill or died? Do you need to consider insurance cover to pay out in such a situation?

Specialised insurance

A whole host of different policies cover a range of specialist situations – for example engineering insurance and computer policies.

Working from home

If you are planning to start your new business from home then don’t assume that your normal household insurance will be enough. It will not usually cover business risks. It is possible to obtain special ‘working from home’ policies.

Shopping around

It may be stating the obvious but it is important to shop around to get the best deal. You should obtain several quotes and always be wary of cheap deals. A personal recommendation may be the best way to decide.

Level of cover

Again it may be stating the obvious but too much cover and your cash flow will suffer, too little and the consequences can be catastrophic.

Consider the level of cover you need. With buildings and equipment make sure you are covered for the full replacement cost.

If there is to be an excess on any policy make sure that it is set at a sensible level.

How we can help

Please talk to us if you would like any further help on insuring your business.

maynard johns bideford

About The Author

This business advice has been created by Chamber member Maynard Johns accounts & Business Advisors, who offer expert services to businesses in the area.  

View their listing

How Long Should You Keep Books & Records?


There is no simple answer to this question because different
types of record are covered by different types of legislation, as shown by the
following summary:

Value added tax

By law, VAT records have to be kept for six years unless HM
Revenue & Customs (HMRC) allows a shorter period. Any request you make to
keep records for a shorter period must be accompanied by a full explanation of
why it is considered impractical to keep the records.


HMRC recommends that pay records be kept for at least three
years after the income tax year to which they relate.

Taxes generally

For periods before the start of self assessment HMRC could
issue an assessment at any time up to six years after the end of the chargeable
period to which the assessment related. There is no limit in cases of fraud or
wilful default. All business records must be retained for a period of (broadly)
six years.

As a general rule, HMRC can raise an enquiry into a self
assessment tax return within 12 months of the date the return was submitted.
Where an incomplete return has been made, they can issue an assessment at any
time up to four years after the end of the chargeable period to which the
assessment related. Where the loss of tax is due to carelessness, the time
limit is extended to six years. There is a limit of 20 years in cases of fraud
or wilful default. Under normal circumstances, all business records must be
retained for a period of (broadly) six years.

Company records

Under corporation tax self assessment, accounting records
must be preserved for six years from the end of the accounting period.

With regard to the statutory books, the Companies Act states
they must be retained for 10 years.

Government grants

Documents relating to government grants must generally be
kept for four years from receipt of the grant. Where grant aid is still being
received, no documents should be destroyed without consulting the relevant
government department.

Employers’ Liability policy certificates

The former requirement to keep Employers’ Liability policy
certificates for 40 years has been replaced by guidance. Businesses are
reminded that their potential liability for illness and injury at work does not
end when the policy expires. Records should be retained to ensure that any
future claim can be met.

Limitation Act 1980 – general periods

The 1980 Act allows an action to be brought on a contract
for up to six years from the event (e.g. breach) that gave rise to the claim.

Where a contract is under seal (or deed), the time limit is
twelve years.

These periods govern how long invoices and other documents
should be retained as evidence in case of a claim by, or against, another


Taking into account the various requirements outlined above,
we recommend that you keep all records for at least six years after the end of
the accounting period or tax year.

Do call us if you would like further help or advice on this

maynard johns bideford

About The Author

This business advice has been created by Chamber member Maynard Johns accounts & Business Advisors, who offer expert services to businesses in the area.  

View their listing